Blossom, Inc. management is considering purchasing a mew machine at a cost of $4,210,000. They expect this equipment to produce cash flows of $ 791,890, $ 823,850, $ 1,001,030, $ 1,068,100, $ 1,124,560, and $ 1,272,500 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and fınal answer to 0 decimal places, e.g. 1,525.)

Blossom, Inc. management is considering purchasing a mew machine at a cost of $4,210,000. They expect this equipment to produce cash flows of $ 791,890, $ 823,850, $ 1,001,030, $ 1,068,100, $ 1,124,560, and $ 1,272,500 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and fınal answer to 0 decimal places, e.g. 1,525.)

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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Your firm is considering a project that requires in investment of $156,000 today. It is projected to pay $47,000 at the end of the year and at the end of the next two years after that (i.e., the cash flows at t = 1, 2, and 3 are all $47,000). Four years from today, the project is projected to pay $76,000. If the appropriate discount rate to value this project is 12% per year, what is the NPV ? Round and express your answer to the nearest whole dollar (i.e., nearest integer).
Use the NPV method to determine whether Stenback Products should invest in the following projects: Project A: Costs $260,000 and offers eight annual net cash inflows of $54,000. Stenback Products requires an annual return of 14% on investments of this nature. Project B: Costs $395,000 and offers 10 annual net cash inflows of $77,000. Stenback Products demands an annual return of 12% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A Net Cash Inflow Project A: Years 1-8 0 Present value of annuity Investment Net present value…
FastTrack Bikes, Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $198,000 per year. Once in production, the bike is expected to make $316,800 per year for 10 years. Assume the cost of capital is 10%. Calculate the NPV of this investment opportunity, assuming all cash flows occur at the end of each year. Should the company make the investment? (Round to the nearestdollar.) By how much must the cost of capital estimate deviate to change the decision? (Hint: Use Excel to calculate the IRR.) 3. What is the NPV of the investment if the cost of capital is 15%? Note: Assume that all cash flows occur at the end of the appropriate year and that the inflows do not start until year 7.
Compute the net present value of this investment.
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Sons Inc. management is considering purchasing a new machine at a cost of $4,390,000. They expect this equipment to produce cash flows of $845,890, $819,250, $917,830, $1,103,400, $1,093,260, and $1,306,800 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV is $
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aa
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