NPV unequal lives. Singing Fish Fine Foods has $2,080,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the store's deli section for additional food service. The estimated after-tax cash flow of this project is$570,000 per year for the next five years. Project 2 is updating the store's wine section. The estimated annual after-tax cash flow for this project is $520,000 for the next six years. If the appropriate discount rate for the deli expansion is 9.5% and the appropriate discount rate forthe wine section is 9.2%, use the NPV to determine which project Singing Fish should choose for the store. Adjust the NPV for unequal lives with the equivalent annual annuity. Does the decision change?If the appropriate discount rate for the deli expansion is 9.5%, what is the NPV of the deli expansion?$(Round to the nearest cent.)

NPV is also known as Net present value. It is a capital budgeting technique. Which helps in decision…

Answered: NPV unequal lives. Singing Fish Fine…

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

See similar textbooks

Similar questions

A local municipality is considering investing $220,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 7-year period as shownin the cash flow profhle given below in thousands of dollars. Notice, an intermediate investment of $140,000 is anticipated in the 6th year of the investment. Based on a MARR of 5%, calculate the benefit-cost ratio of the investment. Round answer to two decimal places. (All values in thousand dollars) End-of Year Costs Benefits Net Cash Flow $220 -$220 $70 $120 $50 $70 $130 $60 $70 $140 $70 4 $70 $150 $80 $70 $160 $90 $210 $170 -$40 7. $70 $160 $90 1.45 2. in
You are working on a bid to build four small apartment buildings a year for the next three years for a local community. This project requires the purchase of $900,000 of equipment which will be depreciated at a CCA rate of 30% over the next three years. The equipment can be sold at the end of the project for $400,000 (ignore any gains or losses). You plan to borrow half of the equipment cost at a rate of 5.5%. You will also need $200,000 in net working capital maintained over the life of the project. The labour costs are expected to be $100,000 per year, fixed costs will be $175,000 a year and the materials will be $140,000 per building per year. Your required rate of return is 12% for this project. Ignoring taxes, what is the minimal amount, that you should bid per building?
Dog Care Co. wants to finance a new animal shelter by making eight annual deposits into a fund earning 11% compounded annually. The first four deposits are to be $19,000 each and will be paid at the beginning of the next four years. The last four deposits are to be $27,000 each and will be paid at the beginning of the last four years. The cost of the new animal shelter amounts to:
Vijay
The cash flows associated with a public-school building repair project are as follows: costs $550,000 per year; benefits $600,000 per year; disbenefits $90,000 per year. Determine the conventional B/C ratio and say whether the project is viable.
A Municipality needs a new fleet of busses. They have a choice between a diesel fuel powered fleet and a natural gas powered fleet. The Diesel fuel fleet has an initial cost of $50,000,000. The annual maintenance is $1,000,000 per year, each and every year of the 10 years life expectancy of the fleet. In addition, there will be a carbon emissions tax that starts at $250,000 in year 2, and increases by $250,000 each and every year after that. At the end of the ten years the busses can be sold for $5,000,000. The Natural Gas fleet can be purchased for $60,000,000. The annual maintenance is $800,000 per year. There is no carbon tax on the fleet. However, there is a 65% chance of a $5,000,000 one time "Special Maintenance cost at year 7. Because of certain toxic parts on the bus engines, the municipality will have to pay $5,000,000 and the end of the bus life to dispose of them. Use the present value approach to determine which fleet is more cost effective. The cost of money is 6% For the…
A clinic is considering the possibility of two new purchases: new MRI equipment and new biopsy equipment. Each project requires an investment of $425,000. The expected life for each is five years with no expected salvage value. The net cash inflows associated with the two independent projects are as follows: 1. Compute the payback period for each project. 2. Compute the accounting rate of return for each project.
Citywide Courier Services projects that demand for its services will rise for a period of three years before subsiding. It can lease additional communication for $1,000 at the beginning of every quarter for three years. Alternatively, it can purchase the equipment for $13,995 at 7.5% compounded quarterly. The salvage value of the equipment after three years is expected to be $4,000. Which option would you recommend? How much better is that option in today's dollars?
All parts stepwise or skip I will rate accordingly

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

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…

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

SEE MORE TEXTBOOKS