(a) The net present value. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 0 decimal places, e.g. 5,275.) Net present value $
(a) The net present value. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 0 decimal places, e.g. 5,275.) Net present value $
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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Transcribed Image Text:(a)
The net present value. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 0
decimal places, e.g. 5,275.)
Net present value $
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Transcribed Image Text:Liam Bat became a baseball enthusiast at a very early age. All of his baseball experience has provided him valuable knowledge of the
sport, and he is thinking about going into the batting cage business. He estimates the construction of a state-of-the-art building and
the purchase of necessary equipment will cost $974,000. Both the facility and the equipment will be depreciated over 12 years using
the straight-line method and are expected to have zero salvage values. His required rate of return is 9% (present value factor of
7.16073). Estimated annual net income is as follows:
Revenue
Less:
Utility cost
Supplies
$50,000
$18,000
151,000
Depreciation 80,000
Labor
Other
Net income
$410,500
48,500 347,500
$63,000
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