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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Question
![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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6f4ddc19-62d9-4e19-a878-54e9aea25a7e%2Fba6dd41a-0302-4cea-92fe-626d166556cd%2Fzf5bag1_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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.
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