(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $4,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.1 million. Thus, in year 6 the investment cash inflow totals $5,100,000. Calculate the project's NPV using a discount rate of 7 percent. If the discount rate is 7 percent, then the project's NPV is $ (Round to the nearest dollar.)

(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $4,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.1 million. Thus, in year 6 the investment cash inflow totals $5,100,000. Calculate the project's NPV using a discount rate of 7 percent. If the discount rate is 7 percent, then the project's NPV is $ (Round to the nearest dollar.)

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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(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $0.8 million. Thus, in 6 the investment cash inflow totals $2,800,000. Calculate the project's NPV using a discount rate of 6 percent. year If the discount rate is 6 percent, then the project's NPV is $ (Round to the nearest dollar.)
(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $3,500,000 per year for each of the next 7 years. In year 7 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 7 the investment cash inflow totals $4,500,000. Calculate the project's NPV using a discount rate of 6 percent. If the discount rate is 6 percent, then the project's NPV is $ (Round to the nearest dollar.)
(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $11,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $3,000,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $0.9 million. Thus, in year 9 the investment cash inflow totals $3,900,000. Calculate the project's NPV using a discount rate of 10 percent. If the discount rate is 10 percent, then the project's NPV is S. (Round to the nearest dollar.)
Wildhorse's Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,840. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $8,540 $12,200 $15,860 2 10,980 12,200 14,640 3 14,640 12,200 13,420 Total $34,160 $36,600 $43,920 The equipment's salvage value is zero, and Wildhorse uses straight-line depreciation. Wildhorse will not accept any project with a cash payback period over 2 years. Wildhorse's required rate of return is 12%. Click here to view PV table. (a) Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) AA BB years years CC years
Amalgamated Industries is considering a 4- year project. The project is expected to generate operating cash flows of $11 million, $14 million, $16 million, and $9 million over the four years, respectively. It will require initial capital expenditures of $41 million dollars and an intitial investment in NWC of $24 million. The firm expects to generate a $11 million after tax salvage value from the sale of equipment when the project ends, and it expects to recover 100% of its nwc investments. Assuming the firm requires a return of 10% for projects of this risk level, what is the project's IRR? Question 3 options: 9.59% 9.22% 8.95% 9.41% 9.69%
Agate Marketing Inc. intends to distribute a new product. It is expected to produce net returns of $13,000 per year for the first four years and $11,000 per year for the following three years. The facilities required to distribute the product will cost $36,000, with a disposal value of $9,600 after seven years. The facilities will require a major facelift costing $10,000 each after three years and after five years. If Agate requires a return on investment of 15%, should the company distribute the new product? If NPV is negative your answer must include the negative sign. Net Present Value (NPV) = Should the decision be Accept or Reject? Fir
Amalgamated Industries is considering a 4- year project. The project is expected to generate operating cash flows of $3 million, $16 million, $18 million, and $14 million over the four years, respectively. It will require initial capital expenditures of $35 million dollars and an initial investment in NWC of $6 million. The firm expects to generate a $6 million after tax salvage value from the sale of equipment when the project ends, and it expects to recover 100% of its nw investments. Assuming the firm requires a return of 15% for projects of this risk level, what is the project's IRR? A. 16.16% B. 16.47% C. 15.39% D. 16.00% E. 15.70%
(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $11,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 7 years. In year 7 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $0.8 million. Thus, in year 7 the investment cash inflow totals $2,800,000. Calculate the project's NPV using a discount rate of 6 percent. If the discount rate is 6 percent, then the project's NPV is $nothing. (Round to the nearest dollar.)
Management of Braden Boats, Inc. is considering an expansion in the firm’s product line that requires the purchase of an additional $162,000 in equipment with installation costs of $19,000 and removal expenses of $2,000 (Note: the removal expenses are considered terminal cash flows and not associated with the installation of the new equipment). The equipment and installation costs will be depreciated over five years using straight-line depreciation. The expansion is expected to increase earnings before depreciation and taxes as follows: Years 1 and 2 Years 3 and 4 Year 5 $ 80,000 $ 60,000 $ 50,000 The firm’s income tax rate is 30 percent and the weighted-average cost of capital is 18 percent. Based on the net present value method of capital budgeting, should management undertake this project? Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. NPV: $ The firm make the investment.
Pina Colada Manufacturing Company is considering three new projects, each requiring an equipment investment of $25,600. Each project will last for 3 years and produce the following cash flows. Year 1 2 3 AA BB $8,200 $11,100 $12,200 11,200 10,200 16,200 Total $34,600 (a) 11,100 11,100 Payback period $33,300 CC 10,200 The salvage value for each of the projects is zero. Pina Colada uses straight-line depreciation. Pina Colada will not accept any project with a payback period over 2.2 years, Pina Colada's minimum required rate of return is 12%. Click here to view PV tables. $33,600 Compute each project's payback period: (Round answers to 2 decimal places, e.g. 52.75.) AA years BB years CC years
DataPoint Engineering is considering the purchase of a new piece of equipment for $200,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $100,000 in nondepreciable working capital. $25,000 of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 12–11, Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Need help with subpart D-1, previously asked question and was a-c were answered. Year Amount 1 $ 173,000 2 152,000 3 108,000 4 103,000 5 89,000 6 71,000 The tax rate is 25 percent. The cost of capital must be computed based on the following: Cost(aftertax) Weights Debt Kd 5.50 % 30 % Preferred stock Kp 9.20 10…
Prescott Corporation is considering an investment in new equipment costing $912,000. The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a residual value of $92,000. The equipment is expected to generate net cash inflows of $140,000 for each of the first five years and $100,000 for each of the last five years. What is the accounting rate of return associated with the equipment investment? (Round your answer to two decimal places.) OA. 8.59% OB. 8.66% OC. 8.99% OD. 7.57% C

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