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Sheet 4
Subject Capital Budgeting
Problem One:
Hook Industries is considering the replacement of one of its old drill presses. Three
alternative replacement presses are under consideration. The relevant cash flows
associated with each are shown in the following table. The firm’s cost of capital is 15%.
Problem Two:
1 $20,000
2 25,000
3 30,000
4 35,000
5 40,000
Problem Three:
Thomas Company is considering two mutually exclusive projects. The firm, which has a
12% cost of capital, has estimated its cash flows as shown in the following table.
Project A Project B
1 $25,000 $40,000
2 35,000 35,000
3 45,000 30,000
4 50,000 10,000
5 55,000 5,000