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Sauron [17]
3 years ago
12

Project S has a cost of $11,000 and is expected to produce benefits (cash flows) of $3,400 per year for 5 years. Project L costs

$23,000 and is expected to produce cash flows of $6,900 per year for 5 years. Calculate the two projects' NPVs, assuming a cost of capital of 14%. Do not round intermediate calculations. Round your answers to the nearest cent.
Business
1 answer:
Kipish [7]3 years ago
5 0

Answer:

Project S = $672.48

Project L = $11,500

Explanation:

Net Present Value (NPV) Is Calculated by Taking the Present day (Discounted) Value of all future Net Cash flows based on the Business Cost of Capital and Subtracting the Initial Cost of the Investment.

Using a Financial Calculator NPV calculations will be as follows:

Project S

CF0 = ( $11,000)

CF1  = $3,400

CF2  = $3,400

CF3  = $3,400

CF4  = $3,400

CF5  = $3,400

i = 14 %

NPV = $672.48

Project L

CF0 = ( $23,000)

CF1  = $6,900

CF2  = $6,900

CF3  = $6,900

CF4  = $6,900

CF5  = $6,900

i = 14 %

NPV = $11,500.

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Linke Motors has a beta of 1.30, the T-bill rate is 3.00%, and the T-bond rate is 6.5%. The annual return on the stock market du
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Explanation:

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The epa is planning to stiffen the requirements for cleaning pollutants from the stacks of? coal-fired electricity generating? p
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3 years ago
(Ignore income taxes in this problem.) Alesi Corporation is considering purchasing a machine that would cost $283,850 and have a
gavmur [86]

Answer:

(A) Payback period for the machine= 3.5 years

(B) Simple rate of return for the machine= 87.5%

Explanation:

Alesu corporation is considering purchasing a machine that would cost $283,850

The useful life is 5 years

The machine would reduce cash operating costs by $81,100 per year

The salvage value is $107,100

(A) The payback period for the machine can be calculated as follows

= cost/amount of cash flow

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(B) The simple rate of return for the machine can be calculated as follows

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