(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $3,500,000 per year for each of the next 7 years. In year 7 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 7 the investment cash inflow totals $4,500,000. Calculate the project's NPV using a discount rate of 6 percent. If the discount rate is 6 percent, then the project's NPV is $ (Round to the nearest dollar.)
(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $3,500,000 per year for each of the next 7 years. In year 7 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 7 the investment cash inflow totals $4,500,000. Calculate the project's NPV using a discount rate of 6 percent. If the discount rate is 6 percent, then the project's NPV is $ (Round to the nearest dollar.)
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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![(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in
Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate
annual net cash inflows from reduced costs of operations equal to $3,500,000 per year for each of the next 7 years. In
year 7 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million.
Thus, in year 7 the investment cash inflow totals $4,500,000. Calculate the project's NPV using a discount rate of 6
percent.
If the discount rate is 6 percent, then the project's NPV is $
(Round to the nearest dollar.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F166250eb-4832-4059-b1e0-8c4c2ba199f2%2F9968028d-6e86-4f82-935f-b9c8198b1dea%2Fxfgnt4_processed.png&w=3840&q=75)
Transcribed Image Text:(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in
Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate
annual net cash inflows from reduced costs of operations equal to $3,500,000 per year for each of the next 7 years. In
year 7 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million.
Thus, in year 7 the investment cash inflow totals $4,500,000. Calculate the project's NPV using a discount rate of 6
percent.
If the discount rate is 6 percent, then the project's NPV is $
(Round to the nearest dollar.)
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