Question

Rachel’s Crab Heaven (RCH) supplies crabs, fish, and clams to restaurants along the east coast. Rachel is sole owner and chief executive. She currently has one fishing vessel but is considering investing in one that would increase her daily harvest two to three fold. Rachel estimates the new vessel would generate an operating cash flow of $207,000 per year for eight years. The vessel has an initial investment of $1,250,000. Rachel will borrow the entire amount from First Bank at 6.2%.

Draw the NPV-IRR profile for this investment.

Answer 1

cash flows ve are as follows: crash flow (1,250, ODD) 207OOD 207 ooo 207000 207.000 oton WN- 207000 207000 207 DOO 207000 NPV = - 1250 DOD & 207000 (1062) = 25,313.97 207000 que &20700D 1.0622 (1 0628 IRR : Let the IRR in ... 0= -125000D + 207000 (Ita) r = 6.71% 207000 (1+0)2 + 207000 THN)