Homework Answers
| Initial cost | = | $2,225,000.00 | |||||
| Calculation of present value of cashflow | |||||||
| Year | 1 | 2 | 3 | 4 | Total | ||
| a) | Cashflow | $350,000.00 | $475,000.00 | $425,000.00 | $450,000.00 | ||
| b) | PV factor @ 8% | 0.9259 | 0.8573 | 0.7938 | 0.7350 | ||
| c) | Present value | $324,074.07 | $407,235.94 | $337,378.70 | $330,763.43 | $1,399,452.15 | |
| Net present value (NPV) | = | Present value of cash inflow-Initial cash outflow | |||||
| = | $1,399,452.15-$2,225,000 | ||||||
| = | -$825,547.85 | or -$825,548 | |||||
| Answer is (.c) -$825547.85 | |||||||
| If the firm follows NPV method ,it should REJECT the project due to negative NPV | |||||||
| Please upvote the answer | |||||||
| If you have any doubt ,Please ask | |||||||
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Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one...
Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one...
Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Extensive Enterprise Inc. is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,750,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $375,000 $450,000 $425,000 $450,000 Extensive...
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1. Net present value (NPV)
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Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one...
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The net present value (NPV) rule is considered one of the most common and preferred criteria...
The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $500,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $350,000 Year 2 $425,000 Year 3 $425,000 Year 4 $400,000 Happy Dog Soap Company’s weighted average...
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The net present value (NPV) rule is considered one of the most common and preferred criteria...
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Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Extensive Enterprise Inc. is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,750,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $375,000 $450,000 $425,000 $450,000 Extensive...
1. Net present value (NPV)
1. Net present value (NPV) Aa Aa E Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Lumbering Ox Truckmakers is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows: Year Year...
Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Cute Camel Woodcraft Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $400,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $350,000 Year 2 $475,000 Year 3 $500,000 Year 4...
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Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Black Sheep Broadcasting Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,750,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 Year 3 Year 4 $300,000 $475,000 $500,000...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions Consider this case: Suppose Pheasant Pharmaceuticals is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 Year 3 Year 4...
Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions Consider this case: Suppose Hungry Whale Electronics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $450,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $375,000 Year 2 $400,000 Year 3 $425,000 Year 4 $500,000...
The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,225,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $375,000 $475,000 $425,000 $500,000 Celestial Crane Cosmetics's weighted average cost of...
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