Chapter 10 - Suppose we have a company that is considering undertaking a project. The annual cash flows and equipment salvage values are provided belov Operating Cash Flow Year Salvage Value -$5,000 $2,500 $2,000 $1,500 $1,000 $4,000 $3,000 $2,000 $0 |Salvage value if the equipment is sold at the end of year 1 Salvage value if the equipment is sold at the end of year 2 Salvage value if the equipment is sold at the end of year 3 Salvage value if the equipment is sold at the end of year 4 1 2 3 4 WACC = 10% How many years should this company keep the project going? The answer is either 1 year, 2 years, 3 years or 4 years. Note #1: You don't need to consider anything else other than the information provided above. For example, taxes are already factored into these numbers. Note #2: You might find Chapter 10 slides 29 and 30 helpful and the Chapter 10 Tool Kit Answers tab beginning on row 483. Optimal # of Years =

Chapter 10 - Suppose we have a company that is considering undertaking a project. The annual cash flows and equipment salvage values are provided belov Operating Cash Flow Year Salvage Value -$5,000 $2,500 $2,000 $1,500 $1,000 $4,000 $3,000 $2,000 $0 |Salvage value if the equipment is sold at the end of year 1 Salvage value if the equipment is sold at the end of year 2 Salvage value if the equipment is sold at the end of year 3 Salvage value if the equipment is sold at the end of year 4 1 2 3 4 WACC = 10% How many years should this company keep the project going? The answer is either 1 year, 2 years, 3 years or 4 years. Note #1: You don't need to consider anything else other than the information provided above. For example, taxes are already factored into these numbers. Note #2: You might find Chapter 10 slides 29 and 30 helpful and the Chapter 10 Tool Kit Answers tab beginning on row 483. Optimal # of Years =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Chapter 10 - Suppose we have a company that is considering undertaking a project. The annual cash flows and equipment salvage values are provided below.
Operating Cash
Flow
Year
Salvage Value
-$5,000
$2,500
$2,000
$1,500
$1,000
$4,000
$3,000
$2,000
$0
Salvage value if the equipment is sold at the end of year 1
Salvage value if the equipment is sold at the end of year 2
Salvage value if the equipment is sold at the end of year 3
Salvage value if the equipment is sold at the end of year 4
1
2
4
WACC =
10%
How many years should this company keep the project going? The answer is either 1 year, 2 years, 3 years or 4 years.
Note #1: You don't need to consider anything else other than the information provided above. For example, taxes are already factored into these numbers.
Note #2: You might find Chapter 10 slides 29 and 30 helpful and the Chapter 10 Tool Kit Answers tab beginning on row 483.
Optimal # of Years =

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