Question

Davis Chili Company is considering an investment of $65,000, which produces the following inflows: Year Cash...

Davis Chili Company is considering an investment of $65,000, which produces the following inflows:

Year Cash Flow
1 $ 29,000
2 28,000
3 25,000

Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.


a. Determine the net present value of the project based on a zero percent discount rate.

b. Determine the net present value of the project based on a 11 percent discount rate. (Do not round intermediate calculations and round your answer to 2 decimal places.)

c. Determine the net present value of the project based on a 20 percent discount rate. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)

Homework Answers

Answer #1

a)

Net present value = Present value of cash inflows - presnet value of cash outflows

Net present value = -65,000 + 29,000 / (1 + 0)^1 + 28,000 / (1 + 0)^2 + 25,000 / (1 + 0)^3

Net present value = -65,000 + 29,000 + 28,000 + 25,000

Net present value = $17,000.00

b)

Net present value = Present value of cash inflows - presnet value of cash outflows

Net present value = -65,000 + 29,000 / (1 + 0.11)^1 + 28,000 / (1 + 0.11)^2 + 25,000 / (1 + 0.11)^3

Net present value = -65,000 + 26,126.1261 + 22,725.4281 + 18,279.7845

Net present value = 2,131.34

c)

Net present value = Present value of cash inflows - presnet value of cash outflows

Net present value = -65,000 + 29,000 / (1 + 0.2)^1 + 28,000 / (1 + 0.2)^2 + 25,000 / (1 + 0.2)^3

Net present value = -65,000 + 24,166.6667 + 19,444.444 + 14,467.5926

Net present value = -6,921.30

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Davis Chili Company is considering an investment of $37,000, which produces the following inflows: Year Cash...
Davis Chili Company is considering an investment of $37,000, which produces the following inflows: Year Cash Flow 1 $ 17,000 2 16,000 3 13,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.    a. Determine the net present value of the project based on a zero percent discount rate.      Net present value $       b. Determine the net present value of the project based on a 10 percent...
A project has the following cash flows: Year Cash Flow 0 $ 72,500 1 –51,500 2...
A project has the following cash flows: Year Cash Flow 0 $ 72,500 1 –51,500 2 –28,000 What is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return             % What is the NPV of this project if the required return is 6 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your...
Problem 8-9 Calculating NPV [LO 4] Consider the following cash flows:    Year Cash Flow 0...
Problem 8-9 Calculating NPV [LO 4] Consider the following cash flows:    Year Cash Flow 0 –$ 33,000 1 14,400 2 17,300 3 11,800 What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)    Net present value            $    What is the NPV at a discount rate of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal...
Project L costs $65,000, its expected cash inflows are $9,000 per year for 8 years, and...
Project L costs $65,000, its expected cash inflows are $9,000 per year for 8 years, and its WACC is 13%. What is the project's MIRR? Round your answer to two decimal places. Do not round your intermediate calculations.
Project L costs $65,000, its expected cash inflows are $9,000 per year for 8 years, and...
Project L costs $65,000, its expected cash inflows are $9,000 per year for 8 years, and its WACC is 10%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.   %
The Hudson Corporation makes an investment of $70,400 that provides the following cash flow: Use Appendix...
The Hudson Corporation makes an investment of $70,400 that provides the following cash flow: Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow 1 $36,000 2 36,000 3 24,000 a. What is the net present value at a discount rate of 13 percent? (Do not round intermediate calculations and round your answer to 2 decimal places.) b. What is the internal rate of return?...
Project L costs $65,000, its expected cash inflows are $15,000 per year for 8 years, and...
Project L costs $65,000, its expected cash inflows are $15,000 per year for 8 years, and its WACC is 10%. What is the project's discounted payback? Do not round intermediate calculations. Round your answer to two decimal places.   years
Project L costs $65,000, its expected cash inflows are $15,000 per year for 8 years, and...
Project L costs $65,000, its expected cash inflows are $15,000 per year for 8 years, and its WACC is 10%. What is the project's discounted payback? Do not round intermediate calculations. Round your answer to two decimal places. _____Years
Rooster Co. has identified an investment project with the following cash flows. Year Cash Flow 1...
Rooster Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 970 2 760 3 1,430 4 1,790 Requirement 1: If the discount rate is 9 percent, what is the present value of these cash flows? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Present value $ Requirement 2: What is the present value at 17 percent? (Enter rounded...
The Hudson Corporation makes an investment of $28,050 that provides the following cash flow: Use Appendix...
The Hudson Corporation makes an investment of $28,050 that provides the following cash flow: Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.    Year Cash Flow 1 $15,000 2 15,000 3 3,000    a. What is the net present value at a discount rate of 4 percent? (Do not round intermediate calculations and round your answer to 2 decimal places.)    b. What is the internal...