Q1:You wish to start a sproject.Your initial investment is$100000. You generate 0cashflows for first2years but$16000in year3&increase by15%every year till year7,after which time they decline by2%until year9.You expect0growth in cash flows beyond yaer9, but expect to generate constant cashflows into the foreseeable future. If capital cost=8% per year. ANS:NPV=$168609.42 Q2:You want to buy new machine&replace the existing machine, which you have used for the past3years.New machine costs$75000&will be useful for5years after which can be sold to fetch salvage value of$9000.New machine will be depreciated straight-line 0over5years.Old machine was bought for$70000&also depreciates straight-line to0over5years.Old machine can be sold today for$30000but worth$6500in5years. New machine is efficient. Annual savings in operating costs are $12000.Your net working capital requirement will decline annually by $4000.Tax at rate is35%&has capital cost rate of12% ANS:NPV(replacing)=$9598.75 Please show me detailed step by step solutions. Thanks. (from Fundamentals of Corporate Finance - McGraw-Hill)
Q1:You wish to start a sproject.Your initial investment is$100000. You generate 0cashflows for first2years but$16000in year3&increase by15%every year till year7,after which time they decline by2%until year9.You expect0growth in cash flows beyond yaer9, but expect to generate constant cashflows into the foreseeable future. If capital cost=8% per year. ANS:NPV=$168609.42 Q2:You want to buy new machine&replace the existing machine, which you have used for the past3years.New machine costs$75000&will be useful for5years after which can be sold to fetch salvage value of$9000.New machine will be depreciated straight-line 0over5years.Old machine was bought for$70000&also depreciates straight-line to0over5years.Old machine can be sold today for$30000but worth$6500in5years. New machine is efficient. Annual savings in operating costs are $12000.Your net working capital requirement will decline annually by $4000.Tax at rate is35%&has capital cost rate of12% ANS:NPV(replacing)=$9598.75 Please show me detailed step by step solutions. Thanks. (from Fundamentals of Corporate Finance - McGraw-Hill)
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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Q1:You wish to start a sproject.Your initial investment is$100000. You generate 0cashflows for first2years but$16000in year3&increase by15%every year till year7,after which time they decline by2%until year9.You expect0growth in cash flows beyond yaer9, but expect to generate constant cashflows into the foreseeable future. If capital cost=8% per year.
ANS:NPV=$168609.42
Q2:You want to buy new machine&replace the existing machine, which you have used for the past3years.New machine costs$75000&will be useful for5years after which can be sold to fetch salvage value of$9000.New machine will be depreciated straight-line 0over5years.Old machine was bought for$70000&also depreciates straight-line to0over5years.Old machine can be sold today for$30000but worth$6500in5years.
New machine is efficient. Annual savings in operating costs are $12000.Your net working capital requirement will decline annually by $4000.Tax at rate is35%&has capital cost rate of12%
ANS:NPV(replacing)=$9598.75
Please show me detailed step by step solutions. Thanks.
(from Fundamentals of Corporate Finance - McGraw-Hill)
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