4| 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 weighted average cost of capital is 15%. Initial investment (CF0) $85,000 $60,000
Year (t) Cash inflows (CFt)
1 $18,000 $12,000
2 18,000 14,000
3 18,000 16,000
4 18,000 18,000
5 18,000 20,000
6 20,000 25,000
7 16,000 — 40,000
8 -15,000 — 50,000

Required
a. Calculate the net present value (NPV) and profitability index of each press.
b. Using NPV, evaluate the acceptability of each press. Assume: the presses are mutually exclusive

Required: 1-a. the marketing manager argues that a $5,000 increase in the monthly advertising budget would increase monthly sales by $9,000. calculate the increase or decrease in net operating income. 1-b. should the advertising budget be increased ? yes no hintsreferencesebook & resources hint #1 check my work 8.value: 1.00 pointsrequired information 2-a. refer to the original data. management is considering using higher-quality components that would increase the variable expense by $2 per unit. the marketing manager believes that the higher-quality product would increase sales by 10% per month. calculate the change in total contribution margin. 2-b. should the higher-quality components be used? yes no