(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $10,500,000 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 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 $1.2 million. Thus, in year 9 the investment cash inflow totals $3,200,000. Calculate the project's NPV using a discount rate of 8 percent. If the discount rate is 8 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 $10,500,000 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 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 $1.2 million. Thus, in year 9 the investment cash inflow totals $3,200,000. Calculate the project's NPV using a discount rate of 8 percent. If the discount rate is 8 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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GeoSourcex is considering opening a new titanium mine. Once in operation, the mine is expected to produce positive net cash flows in perpetuity starting 3 years from now at $19.5 million per year but declining at a constant rate of 1.8% per year. The costs of getting the mine operational include an immediate payment of $110.0 million to purchase the land and acquire the mineral rights, plus other start -up costs of $10.0 million per year for three years starting in one year. If the project's cost of capital is 10.2% per year (compounded annually) what is the Net Present Value of this new mine?
Briar Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net cash flow of $204,000. The equipment will have an initial cost of $1,204,000 and an 8-year useful life. The salvage value of the equipment is estimated to be $204,000. Briar's cost of capital is 8%. (Future Value of $1. Present Value of $1, Future Value Annuity of $1. Present Value Annuity of $1) Note: Use appropriate factor from the PV tables. Required: a. What is the accounting rate of return? b. What is the payback period? c. What is the net present value? d. What would the net present value be with a 14% cost of capital? e. Based on the NPV calculations, what would be the equipment's internal rate of return? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What is the accounting rate of return? Required E Note: Do not round intermediate calculations. Round your final…
Project A requires a $315,000 initial investment for new machinery with a five-year life and a salvage value of $35,500. Project A is expected to yield annual income of $23,900 per year and net cash flow of $78,750 per year for the next five years.Compute Project A’s accounting rate of return. *please help correct the answer
Carson Trucking is considering whether to expand its regional service center in Moab, Utah. The expansion will require the expenditure of $10,000,000 on new service equipment and will generate annual net cash inflows by reducing operating costs by $2,500,000 per year for each of the next eight years. In year 8, 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 8 the investment cash inflow will total $3,500,000. Calculate the project NPV using each of the following discount rates: A. 9 percent B. 11 percent C. 13 percent D. 15 percent in excel
Bruin Building Supply is considering expansion. Operating cash flow will be $710,000 a year. The project will require new equipment costing $1,850,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $370,000 at the end of the project. The project requires an initial investment of $525,000 in net working capital, which will be recovered at the end of the project. The tax rate is 28.00 percent. What is the project's IRR? Answer in whole numbers, rounded to three decimal places.
Carper Company is considering a capital investment of $400,000 in additional productive facilities. The new machinery is expected to have useful life of 6 years with no salvage value Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $25,000 and $90,000, respectively. Carper has an 10% cost of capital rate, which is the required rate of return on the investment. (a) Compute the cash payback period. (b) Using the discounted cash flow technique, calculate the NPV.
Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $10,500,000 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 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 $1.2 million. Thus, in year 9 the investment cash inflow totals $3,200,000. Calculate the project's NPV using a discount rate of 10%. If the discount rate is 10%, then the project's NPV is $____________
(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $10,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,500,000 per year for each of the next 8 years. In year 8 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 8 the investment cash inflow totals $3,500,000. Calculate the project's NPV using a discount rate of 9 percent. If the discount rate is 9 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 $10,500,000 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 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 $1 million. Thus, in year 9 the investment cash inflow totals $4,500,000. Calculate the project's NPV using a discount rate of 8 percent. If the discount rate is 8 percent, then the project's NPV is $. (Round to the nearest dollar.) C
(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 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 $1.2 million. Thus, in year 9 the investment cash inflow totals $3,200,000. 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 S m (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 $9,500,000 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 $0.9 million. Thus, in year 7 the investment cash inflow totals $4,400,000 Calculate the project's NPV using a discount rate of percent If the discount rate is 8 percent, then the projects NPV is 3 (Round to the nearest dollar)
Jefferson Products Inc. is considering purchasing a new automatic press brake, which costs $320,000 including installation and shipping. The machine is expected to generate net cash inflows of $90,000 per year for 12 years. At the end of 12 years, the book value of the machine will be $0, and it is anticipated that the machine will be sold for $110,000. If the press brake project is undertaken, Jefferson will have to increase its net working capital by $100,000. When the project is terminated in 12 years, there will no longer be a need for this incremental working capital, and it can be liquidated and made available to Jefferson for other uses. Jefferson requires a 9 percent annual return on this type of project and its marginal tax rate is 40 percent. Use Table II and Table IV to answer the questions. Calculate the press brake's net present value. Round your answer to the nearest dollar.$ Is the project acceptable? The project is . What is the meaning of the computed net…

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