CC1 company is considering an investment (at time = 0) in a machine that produces arrows. The cost of the machine is 42205 dollars with zero expected salvage value. Annual production in units during the 3-year life of the machine is expected to be (starting at time = 1) 4046 , 7950, and 10350. The arrows sale price per unit is 13 dollars in year one and it is expected to increase by 6% per year thereafter. Production costs per unit will be 5 dollars in year one, and then increase by 4% per year. Depreciation on the machine is fixed at 14204 dollars per year, and the overall tax rate is 40%. and the minimum acceptable rate of return is 10% percent. Calculate the net present value of this investment. Assume all flows are at the end of each year. round your answer to the nearest cent.

CC1 company is considering an investment (at time = 0) in a machine that produces arrows. The cost of the machine is 42205 dollars with zero expected salvage value. Annual production in units during the 3-year life of the machine is expected to be (starting at time = 1) 4046 , 7950, and 10350. The arrows sale price per unit is 13 dollars in year one and it is expected to increase by 6% per year thereafter. Production costs per unit will be 5 dollars in year one, and then increase by 4% per year. Depreciation on the machine is fixed at 14204 dollars per year, and the overall tax rate is 40%. and the minimum acceptable rate of return is 10% percent. Calculate the net present value of this investment. Assume all flows are at the end of each year. round your answer to the nearest cent.

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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