Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Use the below tables to solve the problem.

Present value of S1 10% 12% 0.962 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.925 0.890 | 0.857 0.826 | 0.797 0.769 0.743 0.718 0.694 0.889 0.840 | 0.794 | 0.751 0.712 0.675 | 0.641 | 0.609 0.579 0.855 0.792 0.735 | 0.683 0.636 | 0.592 0.552 0.516 | 0.482 0.822 0.747 0.681 | 0.621 0.567 0.519 0.476 0.437 0.402 0.790 0.705 | 0.630 | 0.564 0.507 0.456 | 0.410 0.370 | 0.335 0.760 0.665 0.583 0.513 0.453 0.400 0.354 0.314 0.279 0.731 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.703 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 0.676 0.558 0.463 | 0.386 0.322 | 0.270 0.227 0.191 | 0.162 Periods 4% 6% 8% 14% 16% 18% 20% 1 2 3 4 6 7 9 10 Present value of an annuity Periods 4% 6% 8% 10% 12% 14% 16% 18% 20% 0.962 0.943 | 0.926 | 0.909 0.893 0.877 0.862 0.847 0.833 1.886 1.833 | 1.783 | 1.736 | 1.690 | 1.647| 1.605 1.566 1.528 2.775 2.673| 2.577 2.487 2.402 2.322 | 2.246 2.174 2.106 3.630 3.465 | 3.312 | 3.170 | 3.037 2.914 | 2.798 4.452 4.212 3.993 | 3.791 | 3.605 3.433 3.274 3.127 2.991 5.242 4.917 4.623 | 4.355 | 4.111 3.889 | 3.685 3.498 3.326 6.002 5.582 | 5.206 4.868 | 4.564 4.288 4.039 | 3.812 3.605 6.733 6.210 | 5.747 5.335 | 4.968 | 4.639 | 4.344 | 4.078 3.837 7.435 6.802 | 6.247 | 5.759 | 5.328 4.946| 4.607 4.303 4.031 8.111 7.360 | 6.710 | 6.145 | 5.650 5.216 | 4.833 4.494 4.192 1 2 3 4 2.69 2.589 5 7 9 10
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Transcribed Image Text:Present value of S1 10% 12% 0.962 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.925 0.890 | 0.857 0.826 | 0.797 0.769 0.743 0.718 0.694 0.889 0.840 | 0.794 | 0.751 0.712 0.675 | 0.641 | 0.609 0.579 0.855 0.792 0.735 | 0.683 0.636 | 0.592 0.552 0.516 | 0.482 0.822 0.747 0.681 | 0.621 0.567 0.519 0.476 0.437 0.402 0.790 0.705 | 0.630 | 0.564 0.507 0.456 | 0.410 0.370 | 0.335 0.760 0.665 0.583 0.513 0.453 0.400 0.354 0.314 0.279 0.731 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.703 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 0.676 0.558 0.463 | 0.386 0.322 | 0.270 0.227 0.191 | 0.162 Periods 4% 6% 8% 14% 16% 18% 20% 1 2 3 4 6 7 9 10 Present value of an annuity Periods 4% 6% 8% 10% 12% 14% 16% 18% 20% 0.962 0.943 | 0.926 | 0.909 0.893 0.877 0.862 0.847 0.833 1.886 1.833 | 1.783 | 1.736 | 1.690 | 1.647| 1.605 1.566 1.528 2.775 2.673| 2.577 2.487 2.402 2.322 | 2.246 2.174 2.106 3.630 3.465 | 3.312 | 3.170 | 3.037 2.914 | 2.798 4.452 4.212 3.993 | 3.791 | 3.605 3.433 3.274 3.127 2.991 5.242 4.917 4.623 | 4.355 | 4.111 3.889 | 3.685 3.498 3.326 6.002 5.582 | 5.206 4.868 | 4.564 4.288 4.039 | 3.812 3.605 6.733 6.210 | 5.747 5.335 | 4.968 | 4.639 | 4.344 | 4.078 3.837 7.435 6.802 | 6.247 | 5.759 | 5.328 4.946| 4.607 4.303 4.031 8.111 7.360 | 6.710 | 6.145 | 5.650 5.216 | 4.833 4.494 4.192 1 2 3 4 2.69 2.589 5 7 9 10
Management is trying to decide whether or not to build a new factory. They believe sales are increasing for their products. They have estimated revenues of $85,000 in year one, $70,000 in years two through ten. In 10 years the factory is obsolete. They estimate expenses annually to operate the factory after year 1 would be $30,000. The cost of the new factory is $450,000. The payments required are $120,000 immediately with the remainder due at completion. The company has hurdle rate of 10%. Use these tables to solve the problems. a. What is the net present value of this new factory? b. What would the net present value be if the factory only produces goods for 9 years?
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Transcribed Image Text:Management is trying to decide whether or not to build a new factory. They believe sales are increasing for their products. They have estimated revenues of $85,000 in year one, $70,000 in years two through ten. In 10 years the factory is obsolete. They estimate expenses annually to operate the factory after year 1 would be $30,000. The cost of the new factory is $450,000. The payments required are $120,000 immediately with the remainder due at completion. The company has hurdle rate of 10%. Use these tables to solve the problems. a. What is the net present value of this new factory? b. What would the net present value be if the factory only produces goods for 9 years?
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