Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 2 3 4 5 Required: $1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 $1,100,000 1,100,000 1,100,000 1,100,000 X 1,100,000 Compute the investment's Net Present Value, assuming a required rate of return of 8 percent. Round present value calculations and your final answer to the nearest dollar. NPV =
Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 2 3 4 5 Required: $1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 $1,100,000 1,100,000 1,100,000 1,100,000 X 1,100,000 Compute the investment's Net Present Value, assuming a required rate of return of 8 percent. Round present value calculations and your final answer to the nearest dollar. NPV =
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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Transcribed Image Text:Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return
Follow the format shown in Exhibit 12B.1 and Exhibit 12B.2 as you complete the requirement below.
Woodard Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The
outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project
follow:
Year Cash Revenues
1
2
3
4
5
$1,500,000
1,500,000
1,500,000
1,500,000
1,500,000
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Check My Work
Incorrect
Cash Expenses
Required:
Compute the investment's Net Present Value, assuming a required rate of return of 8 percent. Round present value calculations and your final answer to the
nearest dollar.
NPV = $
X
$1,100,000
1,100,000
1,100,000
1,100,000
1,100,000
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