(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.
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Chapter1: Investments: Background And Issues
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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 $9,000,000 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.)
Transcribed Image Text:(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.)
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