Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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
cash inflow totals
$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
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
$0.8
million. Thus, in year
7
the investment $2,800,000.
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
$nothing.
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