Birkenstock is considering an investment in a nylon-knitting machine. The machine requires an initial investment of $27,800, has a five-year life, and has no residual value after five years. The company's cost of capital is 10.66%. The company has estimated expected cash inflows for three scenarios: pessimistic, most likely, and optimistic. These expected cash inflows are listed in the following table. Calculate the range for the NPV across the three scenarios. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year 1 2 WN 3 4 5 Pessimistic $6,670 7,180 For the pessimistic scenario, the NPV is $ 8,770 7,810 5,650 Expected cash inflows Most likely ... $9,250 10,300 11,650 10,700 7,720 (Round to the nearest cent.) Optimistic $11,800 13,200 15,790 12,750 8,790
Birkenstock is considering an investment in a nylon-knitting machine. The machine requires an initial investment of $27,800, has a five-year life, and has no residual value after five years. The company's cost of capital is 10.66%. The company has estimated expected cash inflows for three scenarios: pessimistic, most likely, and optimistic. These expected cash inflows are listed in the following table. Calculate the range for the NPV across the three scenarios. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year 1 2 WN 3 4 5 Pessimistic $6,670 7,180 For the pessimistic scenario, the NPV is $ 8,770 7,810 5,650 Expected cash inflows Most likely ... $9,250 10,300 11,650 10,700 7,720 (Round to the nearest cent.) Optimistic $11,800 13,200 15,790 12,750 8,790
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:Birkenstock is considering an investment in a nylon-knitting machine. The machine requires an initial investment of
$27,800, has a five-year life, and has no residual value after five years. The company's cost of capital is 10.66%.
The company has estimated expected cash inflows for three scenarios: pessimistic, most likely, and optimistic.
These expected cash inflows are listed in the following table. Calculate the range for the NPV across the three
scenarios. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.)
Year
1
2
WN
3
4
5
Pessimistic
$6,670
7,180
For the pessimistic scenario, the NPV is $
8,770
7,810
5,650
Expected cash inflows
Most likely
...
$9,250
10,300
11,650
10,700
7,720
(Round to the nearest cent.)
Optimistic
$11,800
13,200
15,790
12,750
8,790
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