Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 6 the investment cash inflow totals $3,000,000. Calculate the project's NPV using a discount rate of 7 percent.
Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 6 the investment cash inflow totals $3,000,000. Calculate the project's NPV using a discount rate of 7 percent.
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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![Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the
expenditure of $9,500,000 on new service equipment and would generate annual net cash inflows from reduced costs
of operations equal to $2,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow
equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 6 the investment cash inflow
totals $3,000,000. Calculate the project's NPV using a discount rate of 7 percent.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffdec98fc-930d-4b2e-b382-fd367b1bd954%2Fe8a1ad37-cde9-41e4-aa11-a7cbc43a4d72%2Fkugjpjj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the
expenditure of $9,500,000 on new service equipment and would generate annual net cash inflows from reduced costs
of operations equal to $2,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow
equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 6 the investment cash inflow
totals $3,000,000. Calculate the project's NPV using a discount rate of 7 percent.
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