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 Carson Trucking is considering whether to expand its regional service center in​ Mohab, UT. The expansion...

 Carson Trucking is considering whether to expand its regional service center in​ Mohab, UT. The expansion requires the expenditure of 10500000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to 3000000 per year for each of the next 9. In year 9 the firm will also get back a cash flow equal to the salvage value of the​ equipment, which is valued at 1 million thus in year 9 the investment cash inflow totals 4000000. Calculate the​ project's NPV using a discount rate of 7 percent

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Answer #1
We need to find total present value for 3000000 per year for each of the next 8yrs and of 4000000 in the 9th year, both at 7% discount rate
Present Value of annuities = Annuities * [ 1- ( 1+r)^-n]/ r
3000000 *((1-(1.07)^-8) /0.07)
3000000 *(0.417990895) /0.07)
3000000 * 5.971298506
17913895.52
Last year that is Year 9 cash flow is 4000000
You can use the PV function in excel
PV(rate,NPER,PMT,FV,TYPE)
PV(7%,9,,4000000)
2175734.97
Total Present value = 17913895.52 + 2175734.97
Total Present value = 20089630.49
b)
NPV(Net present value) = Initial deposit (outflow) + Present values of cash inflows
=-10500000 + 20089630.49
NPV(Net present value) is 9589630.49


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