(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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Carson Trucking is considering whether to expand its regional service center in Moab, Utah. The expansion will require the expenditure of $10,000,000 on new service equipment and will generate annual net cash inflows by reducing operating costs by $2,500,000 per year for each of the next eight years. In year 8, 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 8 the investment cash inflow will total $3,500,000. Calculate the project NPV using each of the following discount rates: A. 9 percent B. 11 percent C. 13 percent D. 15 percent in excel
FNV Industries is considering the purchase of a new processing machine. The initial cost of the machine will be $246,410. The expected increase in net cash inflow as a result of the purchase is: $90,666 for the first year, $73,107 for the second year The machine will have a salvage value of $0 at the end of the second year. Assume that all cash inflows are received at the end of the year. At a discount rate of 6%, what is the net present value of the machine? Round your answer to the nearest whole dollar.
Carper Company is considering a capital investment of $400,000 in additional productive facilities. The new machinery is expected to have useful life of 6 years with no salvage value Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $25,000 and $90,000, respectively. Carper has an 10% cost of capital rate, which is the required rate of return on the investment. (a) Compute the cash payback period. (b) Using the discounted cash flow technique, calculate the NPV.
National Integrated Systems (NIS), a global provider of heating and air conditioning is planning a project whose data is provided below. The project’s equipment has a 3 year tax life after which its salvage value will be zero. The machinery will be depreciated on a straight line basis over three years. Revenues and other operating costs are expected to be constant over the project’s life. What is the project’s cash flow in Year 1? Equipment Cost = $130,000Depreciation rate = 33.33%Annual Sales Revenue= $120,000Operating Costs (ex Depreciation) = $50,000 Tax Rate = 35%
Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $10,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.2 million. Thus, in year 9 the investment cash inflow totals $3,200,000. Calculate the project's NPV using a discount rate of 10%. If the discount rate is 10%, then the project's NPV is $____________
(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $10,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,500,000 per year for each of the next 8 years. In year 8 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 8 the investment cash inflow totals $3,500,000. Calculate the project's NPV using a discount rate of 9 percent. If the discount rate is 9 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 $10,500,000 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 9 years. In year 9 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 9 the investment cash inflow totals $4,500,000. Calculate the project's NPV using a discount rate of 8 percent. If the discount rate is 8 percent, then the project's NPV is $. (Round to the nearest dollar.) C
Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,500,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 6 years. In year 6 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 6 the investment cash inflow totals $3,000,000. Calculate the project's NPV using a discount rate of 7 percent.
Melton Manufacturing Ltd is considering two alternative investment projects. The first project calls for amajor renovation of the company’s manufacturing facility. The second involves replacing just a fewobsolete pieces of equipment in the facility. The company will choose one project or the other this year,but it will not do both. The cash flows associated with each project appear below and the firm discountsproject cash flows at 10%.Year Renovate Replace0 –$4,000,000 –$1,300,0001 2,000,000 1,000,0002 2,000,000 700,0003 2,000,000 300,0004 2,000,000 150,0005 2,000,000 150,000 Chart the NPV profiles of these projects. Label the intersection points on the x- and y-axes and thecrossover point.
(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $11,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,000,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.2 million. Thus, in year 9 the investment cash inflow totals $3,200,000. 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 S m (Round to the nearest dollar.).
Melton Manufacturing Ltd is considering two alternative investment projects. The first project calls for amajor renovation of the company’s manufacturing facility. The second involves replacing just a fewobsolete pieces of equipment in the facility. The company will choose one project or the other this year,but it will not do both. The cash flows associated with each project appear below and the firm discountsproject cash flows at 10%.Year Renovate Replace0 –$4,000,000 –$1,300,0001 2,000,000 1,000,0002 2,000,000 700,0003 2,000,000 300,0004 2,000,000 150,0005 2,000,000 150,000 Based on this NPV profile analysis and assuming the WACC is 20%, which project is recommended?Why?

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