(A) Base case NPV = PV of future cash flow - Project cost
PV of future cash flow = Yearly cash flow / discount rate
= $331,500 / 15% = $2,210,000.00
Thus, NPV = $2,210,000 - $1,500,000 = $710,000.00
Base case NPV = $710,000.00
(B) If the machine can be sold at $1,220,000, it shall be sold if the PV of future cash flows is below this amount.
Let the yearly cash flow be X
Thus, $1,220,000 = X / 15%
X = $183,000
If the expected sales are below $183,000, the machine should be sold
We are examining a new project. We expect to sell 5,100 units per year at $65...
We are examining a new project. We expect to sell 5,100 units per year at $65 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $65 x 5,100 = $331,500. The relevant discount rate is 15 percent, and the initial investment required is $1,500,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. After the first...
We are examining a new project. We expect to sell 5,200 units per year at $66 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $66 * 5,200 = $343,200. The relevant discount rate is 17 percent and the initial investment required is $1,510,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. After the...
We are examining a new project. We expect to sell 6,200 units per year at $76 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $76 × 6,200 = $471,200. The relevant discount rate is 18 percent, and the initial investment required is $1,730,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $...
Problem 24-14 Abandonment Value (LO5] We are examining a new project. We expect to sell 5,400 units per year at $68 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $68 x 5,400 = $367,200. The relevant discount rate is 18 percent, and the initial investment required is $1,530,000. a. What is the base-case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,...
We are examining a new project. We expect to sell 6,900 units per year at $63 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $63 × 6,900 = $434,700. The relevant discount rate is 16 percent, and the initial investment required is $1,800,000. After the first year, the project can be dismantled and sold for $1,670,000. Suppose you think it is likely that expected sales will be...
We are examining a new project. We expect to sell 5,800 units per year at $72 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $72 × 5,800 = $417,600. The relevant discount rate is 15 percent, and the initial investment required is $1,690,000. After the first year, the project can be dismantled and sold for $1,520,000. Suppose you think it is likely that expected sales will be...
We are examining a new project. We expect to sell 5,300 units per year at $67 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $67 × 5,300 = $355,100. The relevant discount rate is 16 percent, and the initial investment required is $1,520,000. After the first year, the project can be dismantled and sold for $1,240,000. Suppose you think it is likely that expected sales will be revised...
We are examining a new project. We expect to sell 6,200 units per year at $76 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $76 x 6,200 = $471,200. The relevant discount rate is 18 percent, and the initial investment required is $1,730,000. After the first year, the project can be dismantled and sold for $1,600,000. Suppose you think it is likely that expected sales will be...
We are examining a new project. We expect to sell 5,200 units per year at $66 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $66 × 5,200 = $343,200. The relevant discount rate is 17 percent, and the initial investment required is $1,510,000. After the first year, the project can be dismantled and sold for $1,230,000. Suppose you think it is likely that expected sales will be revised...
We are examining a new project. We expect to sell 5,200 units per year at $66 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $66 × 5,200 = $343,200. The relevant discount rate is 17 percent, and the initial investment required is $1,510,000. After the first year, the project can be dismantled and sold for $1,230,000. Suppose you think it is likely that expected sales will be...