Question

Investment opportunity involves an initial cost of $2.33 million, annual earnings of $300,000, and a salvage value of $1.25 million at the end of 20 years. This option would also involve one-time maintenance costs of $200,000 in year 10 and $150,000 in year 15. If the assumed annual interest rate is 6%, what is the net present value of the investment?

Answer #1

Investment opportunity OPTION A involves an initial cost of
$1.36 million, annual earnings of $212,000, and a salvage value of
$400,000 at the end of 14 years. If the assumed annual interest
rate is 6%, what is the net present value of the investment OPTION
A?

Drake Corporation is reviewing an investment proposal. The
initial cost is $105,000. Estimates of the book value of the
investment at the end of each year, the net cash flows for each
year, and the net income for each year are presented in the
schedule below. All cash flows are assumed to take place at the end
of the year. The salvage value of the investment at the end of each
year is assumed to equal its book value. There...

An investment opportunity has an initial cost of $1000 today. In
the next year, you will get $1050. The discount rate is 10%. What
is the net present value of that investment opportunity?
Now, if the discount rate is 5%, what is the net present value
of that investment opportunity?
Now, if the discount rate is 4%, what is the net present value
of that investment opportunity?

Machine X has an initial cost of $12,000 and annual maintenance
of $700 per year. It has a useful life of four years and no salvage
value at the end of that time. Machine Y costs $22,000 initially
and has no maintenance costs during the first year. Maintenance is
$200 at the end of the second year and increases by $200 per year
thereafter. Machine Y has a useful life of eight years and an
anticipated salvage value of $5,000...

Tulsa Company is considering investing in new bottling equipment
and has two options: Option A has a lower initial cost but would
require a significant expenditure to rebuild the machine after four
years; Option B has higher maintenance costs, but also has a higher
salvage value at the end of its useful life. Tulsa’s cost of
capital is 11 percent. The following estimates of the cash flows
were developed by Tulsa’s controller:
A
B
Initial Investment
320,000
454,000
Annual Cash...

Drake Corporation is reviewing an investment proposal. The
initial cost and estimates of the book value of the investment at
the end of each year, the net cash flows for each year, and the net
income for each year are presented in the schedule below. All cash
flows are assumed to take place at the end of the year. The salvage
value of the investment at the end of each year is equal to its
book value. There would be...

Drake Corporation is reviewing an investment proposal. The
initial cost and estimates of the book value of the investment at
the end of each year, the net cash flows for each year, and the net
income for each year are presented in the schedule below. All cash
flows are assumed to take place at the end of the year. The salvage
value of the investment at the end of each year is equal to its
book value. There would be...

A firm is considering a replacement project which requires the
initial outlay of $300,000 which includes both an after-tax salvage
from the old asset of $12,000 and an additional working capital
investment of $8,000. The 12-year project is expected to generate
annual incremental cash flows of $54,000 and have an expected
terminal value at the end of the project of $20,000. The cost of
capital is 15 percent, and its marginal tax rate is 40 percent.
Calculate the net present...

NPV Calculate the net present value (NPV)
for a 15-year project with an initial investment of $1,000,000
and a cash inflow of $150,000
per year. Assume that the firm has an opportunity cost of
9%.
Comment on the acceptability of the project.
The project's net present value is $____. (Round to the
nearest cent.)

Drake Corporation is reviewing an investment proposal. The
initial cost and estimates of the book value of the investment at
the end of each year, the net cash flows for each year, and the net
income for each year are presented in the schedule below. All cash
flows are assumed to take place at the end of the year. The salvage
value of the investment at the end of each year is equal to its
book value. There would be...

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