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The Bob's company is considering some new equipment for its bookstores. The project details are as follows: The upfront cost of $400,000 will last for 3 years. At the end of 3 years, Humber can sell the equipment for $200,000. The equipment will generate an extra $40,000 in revenue in the first year, $800,000 for year 2, and then increase by $15,000 for the next three years. Humber can borrow at 5%.   Based on above calculate the project’s NPV IRR Profitability Index

The Bob's company is considering some new equipment for its bookstores. The project details are as follows: The upfront cost of $400,000 will last for 3 years. At the end of 3 years, Humber can sell the equipment for $200,000. The equipment will generate an extra $40,000 in revenue in the first year, $800,000 for year 2, and then increase by $15,000 for the next three years. Humber can borrow at 5%.   Based on above calculate the project’s NPV IRR Profitability Index

Essentials Of Investments
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
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The Bob's company is considering some new equipment for its bookstores. The project details are as follows:

  • The upfront cost of $400,000 will last for 3 years.
  • At the end of 3 years, Humber can sell the equipment for $200,000.
  • The equipment will generate an extra $40,000 in revenue in the first year, $800,000 for year 2, and then increase by $15,000 for the next three years.
  • Humber can borrow at 5%.

 

Based on above calculate the project’s

  1. NPV
  2. IRR
  3. Profitability Index
  4. Payback
  5. Discounted Payback
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