A company is considering expanding a factory. The expansion requires 500 MUD investment immediately. It should generate 122 MUSD tax adjusted cash flow each year for 7 years. The factory can be scrapped for 450 at the end of its lifetime. The firm's cost of capital is 17%. 1. Compute the NPV of the project. MUSD 2. Compute the projects Profitability Index. Answer: 3. Estimate the Discounted Payback Period (0 means it doesn't break even): 4. Estimate the Break-Even Period (0 means it doesn't break even)
A company is considering expanding a factory. The expansion requires 500 MUD investment immediately. It should generate 122 MUSD tax adjusted cash flow each year for 7 years. The factory can be scrapped for 450 at the end of its lifetime. The firm's cost of capital is 17%. 1. Compute the NPV of the project. MUSD 2. Compute the projects Profitability Index. Answer: 3. Estimate the Discounted Payback Period (0 means it doesn't break even): 4. Estimate the Break-Even Period (0 means it doesn't break even)
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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A company is considering expanding a factory. The expansion requires 500 MUD investment immediately. It should generate 122 MUSD tax
adjusted cash flow each year for 7 years. The factory can be scrapped for 450 at the end of its lifetime. The firm's cost of capital is 17%.
1. Compute the NPV of the project.
MUSD
2. Compute the projects Profitability Index. Answer:
3. Estimate the Discounted Payback Period (0 means it doesn't break even):
4. Estimate the Break-Even Period (0 means it doesn't break even):
Transcribed Image Text:A company is considering expanding a factory. The expansion requires 500 MUSD investment immediately. It should generate 122 MUSD tax
adjusted cash flow each year for 7 years. The factory can be scrapped for 450 at the end of its lifetime. The firm's cost of capital is 17%.
1. Compute the NPV of the project.
◆ MUSD
2. Compute the projects Profitability Index. Answer:
◆
✦
3. Estimate the Discounted Payback Period (0 means it doesn't break even):
4. Estimate the Break-Even Period (0 means it doesn't break even):
◆
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