Erie Shipping, which currently transports goods in ships across oceans, is considering project A, which would involve transporting goods in trains over railroadtracks. For most of its existence, Erie Shipping transported goods in ships, trains, and trucks. Project A would require an initial investment of $29,100.00 and isexpected to produce annual cash flows of $2,738.00 each year forever with the first annual cash flow expected in 1 year. What is the NPV of project A, basedon the information in this paragraph and the following table and applying the pure play approach to determining a project's cost of capital?FirmLine of BusinessErie ShippingTransports goods in ships across oceansWACC11.89 percentThomas ShippingCB TruckersTransports goods in trains over railroad tracks 9.01 percentTransports goods in trucks on roads16.76 percentDiversified Shipping Transports goods in ships, trains, and trucks13.27 percent$-12763.48 (plus or minus $10)$-6072.25 (plus or minus $10)$1288.46 (plus or minus $10)$-8466.99 (plus or minus $10)None of the above is within $10 of the correct answer

Part 2: Approach to solving the question:To calculate the NPV of project A using the pure play…

Answered: Erie Shipping, which currently…

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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Calculating IRR, payback, and a missing cash flow. the merriweather printing company is trying to decide on the merits of constructing a new publishing facility. The project is expected to provide a series of positive cash flows for each of the next four years. The estimated cash flows associated with this project are as follows. year. Project cash flows 0 ? 1 $780,000 2 $420,000 3 $310,000 4 $480,000 if you know that the project has a regular payback of 2.6 years, what is the project's IRR?
Channel Tunnel Inc. plans to build an additional 23-mile-long tunnel under the English Channel for added train service. The cost (NINV) of the tunnel is expected to be $4.3 billion. Net cash inflows are expected to equal $764 million per year. How many years must the firm generate this cash inflow stream for investors to earn their required 17 percent rate of return?
Channel Tunnel Inc. plans to build an additional 23-mile-long tunnel under the English Channel for added train service. The cost (NINV) of the tunnel is expected to be $3.2 billion. Net cash inflows are expected to equal $793 million per year. How many years must the firm generate this cash inflow stream for investors to earn their required 24 percent rate of return? Use Table IV to answer the question. Round your answer to the nearest whole number. years
Blur Corp. is looking at investing in a production facility that will require an initial investment of $500,000. The facility will have a three-year useful life, and it will not have any salvage value at the end of the project’s life. If demand is strong, the facility will be able to generate annual cash flows of $250,000, but if demand turns out to be weak, the facility will generate annual cash flows of only $120,000. Blur Corp. thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak. If the company uses a project cost of capital of 13%, what will be the expected net present value (NPV) of this project? -$66,346 -$63,187 -$34,753 -$44,231 Blur Corp. could spend $510,000 to build the facility. Spending the additional $10,000 on the facility will allow the company to switch the products they produce in the facility after the first year of operations if demand turns out to be weak in year 1. If the…
Bullock Gold Mining is evaluating a new gold mine in South Dakota. All of the analysis has been done and the CFO has forecast some of the relevant cash flow information. If BGM opens the mine, it will cost $635 million today (Time 0) and it will have a cash outflow nine years from today (Time 9) of $45 million in costs related to closing the mine and reclaiming the area around. Of the initial costs, BGM will depreciate $500 million over 8 years using straight line method. Expected earnings before taxes for the eight years of operation are shown below. BGM has a required rate of return for all of its gold mines of 12%. Earnings before taxes (in $1,000s): 0 1 2 3 4 5 6 7 8 9 37,857.14 60,714.29 96,428.57 157,857.1 203,571.4 132,142.9 117,857.1 85,000.00 Find the relevant cash flows for each of the relevant periods (Time 0 – Time 9). Calculate the NPV, IRR and Payback Period for the cash flows and indicate whether BGM should…
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(Related to Checkpoint 11.6) (MIRR calculation) Emily's Soccer Mania is considering building a new plant. This project would require an initial cash outlay of $11 million and would generate annual cash inflows of $3.5 million per year for years one through four. In year five the project will require an investment outlay of $4.2 million. During years 6 through 10 the project will provide cash inflows of $4.2 million per year. Calculate the project's MIRR, given a discount rate of 12 percent. REIZE The MIRR of the project with a discount rate of 12% is%. (Round to two decimal places.)
Hi. I need an understanding of how to calculate a projects net investments and cash flows. The image is attached.
1. what amount should be used as the initial cash flow for this project and why?? 2. What is the after-tax salvage value for the spectrometer? 3. What is the MPV of the project? Should the firm accept or reject this project?

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