10.2 Net present value: Kingston, Inc. management is considering purchasing a new machine at a cost of $4,133,250. They expect this equipment to produce cash flows of $814,322, $863,275, $937,250, $1,017,112, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?
10.2 Net present value: Kingston, Inc. management is considering purchasing a new machine at a cost of $4,133,250. They expect this equipment to produce cash flows of $814,322, $863,275, $937,250, $1,017,112, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Can I get the answers to 10.2-10.4
Transcribed Image Text:10.1 Net present value: Riggs Corp. management is planning to spend $650,000 on a new
marketing campaign. They believe that this action will result in additional cash flows of $325,000
over the next three years. If the discount rate is 17.5 percent, what is the NPV on this project?
10.2 Net present value: Kingston, Inc. management is considering purchasing a new machine at
a cost of $4,133,250. They expect this equipment to produce cash flows of $814,322, $863,275,
$937,250, $1,017,112, $1,212,960, and $1,225,000 over the next six years. If the appropriate
discount rate is 15 percent, what is the NPV of this investment?
10.3 Net present value: Crescent Industries management is planning to replace some existing
machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in
the accompanying table. If the firm uses an 18 percent discount rate for projects like this, should
management go ahead with the project?
Year
Cash Flow
-$3,300,000
1
875,123
2
966,222
3
1,145,000
4
1,250,399
5
1,504,445
10.4 Net present value: Management of Franklin Mints, a confectioner, is considering purchasing
a new jelly bean-making machine at a cost of $312,500. They project that the cash flows from this
investment will be $121,450 for the next seven years. If the appropriate discount rate is 14 percent,
what is the NPV for the project?
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