Sensitivity analysis: Boulder Creek Industries Boulder Creek Industries is considering an investment in equipment based on the following estimates: Line Item Description Value Cost of equipment $3,000,000 Residual value $200,000 Useful life 10 years a. Determine the net present value of the equipment, assuming a desired rate of return of 12% and annual net cash flows of $800,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter. Net present value fill in the blank 1 of 1$ b. Determine the net present value of the equipment, assuming a desired rate of return of 12% and annual net cash flows of $400,000, $600,000, and $800,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. If required, use the minus sign to indicate a negative net present value. Annual Net Cash Flow $400,000 $600,000 $800,000 Net present value $fill in the blank 2 $fill in the blank 3 $fill in the blank 4 c. Determine the net present value of the equipment, assuming a desired rate of return of 15% and annual net cash flows of $400,000, $600,000, and $800,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. If required, use the minus sign to indicate a negative net present value. Annual Net Cash Flow $400,000 $600,000 $800,000 Net present value $fill in the blank 5 $fill in the blank 6 $fill in the blank 7 d. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 12%. Round to the nearest dollar. Annual Net Cash Flow fill in the blank 1 of 1$
Sensitivity analysis: Boulder Creek Industries
Boulder Creek Industries is considering an investment in equipment based on the following estimates:
| Line Item Description | Value |
|---|---|
| Cost of equipment | $3,000,000 |
| Residual value | $200,000 |
| Useful life | 10 years |
a. Determine the
Net present value fill in the blank 1 of 1$
b. Determine the net present value of the equipment, assuming a desired rate of return of 12% and annual net cash flows of $400,000, $600,000, and $800,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. If required, use the minus sign to indicate a negative net present value.
| Annual Net Cash Flow | $400,000 | $600,000 | $800,000 |
|---|---|---|---|
| Net present value | $fill in the blank 2 | $fill in the blank 3 | $fill in the blank 4 |
c. Determine the net present value of the equipment, assuming a desired rate of return of 15% and annual net cash flows of $400,000, $600,000, and $800,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. If required, use the minus sign to indicate a negative net present value.
| Annual Net Cash Flow | $400,000 | $600,000 | $800,000 |
|---|---|---|---|
| Net present value | $fill in the blank 5 | $fill in the blank 6 | $fill in the blank 7 |
d. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 12%. Round to the nearest dollar.
Annual Net Cash Flow fill in the blank 1 of 1$
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