Andy's Fishing Charters is considering the purchase of a new boat costing $75,000. The boat is expected to increase profits by $11,000 per year for each of the next 8 years. After 4 years, the boat will require maintenance of $6,000. After the 8 years, the boat will be sold for $40,000. Calculate the NPV of the boat using a cost of capital of 12%. Round your answer to the nearest dollar.

Andy's Fishing Charters is considering the purchase of a new boat costing $75,000. The boat is expected to increase profits by $11,000 per year for each of the next 8 years. After 4 years, the boat will require maintenance of $6,000. After the 8 years, the boat will be sold for $40,000. Calculate the NPV of the boat using a cost of capital of 12%. Round your answer to the nearest dollar.

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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Elijah Enterprises will need to upgrade the computer system in 4 years. They anticipate the upgrade to cost $105,300. If the discount rate is 13%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar. Future Value / (1+R)^n = Amount Required / = What would be required if the discount rate was 8%? Future Value / (1+R)^n = Amount Required / =
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $150,000 first cost. A similar one with many extra features, B has a $579,000 first cost. A will save $50,000 per year over the cutter currently in use. B will save $160,000 per year. Each clicker cutter will last five years. If the MARR is 8 percent, which alternative is better? Use an IBB comparison should be chosen percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore, For the increment from the do-nothing alternative to cutter A. the IRR is (Type integers or decimals rounded to one decimal place as needed.)
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a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,450,000 and will last 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $230,000. She estimates that the return from owning her own shop will be $55,000 per year. She estimates that the shop will have a useful life of 6 years. c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a negative NPV. Should the company buy the new welding system? Yes 2. Conceptual Connection: Assuming a…
Elijah Enterprises will need to upgrade the computer system in 6 years. They anticipate the upgrade to cost $95,300. If the discount rate is 15%, what will be the required yearly investment needed to obtain the money for the upgrade?Round your (1+R)^n value to 2 decimal places and use that number for your final amount required rounded to the nearest dollar. Future Value / (1+R)^n = Amount Required / = What would be required if the discount rate was 8%? Future Value / (1+R)^n = Amount Required / =

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