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
Related questions
Question
(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
$4,000,000
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
$1.1
million. Thus, in year
6
the investment $5,100,000.
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.
(Round to the nearest dollar.)Expert Solution
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