Maggie's Resorts expansion project to increase the number of bungalows on its property had the following information: Maggie's Resorts Initial Investment $7,884,000 Residual Value $1,072,000 Average annual cash inflow $1,341,500 Discount rate 12% Useful life of expansion in years 11
Maggie's Resorts expansion project to increase the number of bungalows on its property had the following information: Maggie's Resorts Initial Investment $7,884,000 Residual Value $1,072,000 Average annual cash inflow $1,341,500 Discount rate 12% Useful life of expansion in years 11
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
Related questions
Question
Maggie's Resorts expansion project to increase the number of bungalows on its property had the following information:
Maggie's Resorts
Initial Investment | $7,884,000 |
---|---|
Residual Value | $1,072,000 |
Average annual |
$1,341,500 |
Discount rate | 12% |
Useful life of expansion in years | 11 |
![Present value factor of an annuity of $1
1 − (1 + r) ¯″
Annuity Factor
Present Value Factor of $1
1
(1 + r)"
Maggie's
Resorts
PV of
annuity
PV of
residual
value
Total PV of
net cash
inflows
Initial
r
Investment
NPV of the
Project
PVE =
of periods
(Round your answers to two decimal places when needed and use rounded answers
for all future calculations).
where PVF =
Net Cash Inflow
1,341,500 ✓
I
1,072,000 ✓
where r = rate, and n =
Present Value Factor, r = rate, and n = #
Annuity PV
Factor
5.93770✔
Is this an attractive project? No, it is a negative NPV. ✓
# of periods.
PV Factor
0.28748✔
Present Value
7,965,424.55 x
308,178.56 x
389,603.11 X
7,884,000.00✔
31,156,469.99 x](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F977780c6-ef46-487b-a361-36b9031b19b4%2F1e683f56-ac65-4554-9759-b3e9a1884276%2Flkjvzf7_processed.png&w=3840&q=75)
Transcribed Image Text:Present value factor of an annuity of $1
1 − (1 + r) ¯″
Annuity Factor
Present Value Factor of $1
1
(1 + r)"
Maggie's
Resorts
PV of
annuity
PV of
residual
value
Total PV of
net cash
inflows
Initial
r
Investment
NPV of the
Project
PVE =
of periods
(Round your answers to two decimal places when needed and use rounded answers
for all future calculations).
where PVF =
Net Cash Inflow
1,341,500 ✓
I
1,072,000 ✓
where r = rate, and n =
Present Value Factor, r = rate, and n = #
Annuity PV
Factor
5.93770✔
Is this an attractive project? No, it is a negative NPV. ✓
# of periods.
PV Factor
0.28748✔
Present Value
7,965,424.55 x
308,178.56 x
389,603.11 X
7,884,000.00✔
31,156,469.99 x
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education