1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Jobisdone [24]
3 years ago
11

Barton Steel is considering the purchase of a new steel mill. The first option is a top of the line high efficiency mill with a

cost of $25 million. This mill will generate cash flows of $10 million per year for the next six years. At the end of the sixth year, Barton will have to reclaim the land under the new mill at a cost of $15 million. The second option is an economy mill that will generate $4 million in cash flows for the next six years, but require no land reclamation. This mill costs $12 million. If Barton estimates its cost of capital to be 9.5% which project should they accept
Business
1 answer:
iris [78.8K]3 years ago
6 0

Answer:

The first project should be chosen

Explanation:

Net present value is the present value of after-tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator

To determine which project to accept, calculate the NPV for the two projects

The first option

Cash flow in year 0 = $-25 million

Cash flow each year for year 1 - 5 = $10 million

Cash flow in year 6 =  $10 million - $15 million = $-5 million

I = 9.5

NPV = $10.50 million

Option two

Cash flow in year 0 = $-12 million

Cash flow each year for year 1 - 6 = $4 million

I = 9.5

NPV = $5.68 million

The first option should be chosen because the NPV of the first option yields the higher NPV

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

You might be interested in
PLEASE HELP ME URGENT
Irina-Kira [14]
The answer is C, good luck!
4 0
3 years ago
Read 2 more answers
A certain chicken company decides that it will become the market leader in the poultry business in five years with a 40 percent
Stolb23 [73]

Answer:

The correct answer is letter "E": goal.

Explanation:

Goals represent the objectives companies set to accomplish over a specific period and represent the reason why the firm takes several methodical steps towards achieving that mission. Goals can be <em>quantified </em>and <em>measured </em>to verify inf they are achievable.

5 0
2 years ago
Chiquita produces bananas for an average explicit cost of $0.25 per banana and sells 1 million bananas per week for a price of $
VLD [36.1K]

Answer:

Chiquita makes an economic profit of $250,000.

5 0
3 years ago
After the civil war, what became the major form of business organization because of its ability to raise money through the sale
Illusion [34]
After the civil war, CORPORATION became the major form of business organization because of its ability to raise money through the sale of shares of stock. A corporation is a type of business that is owned by stockholders who share its profits but are not personally responsible for its debts.
7 0
3 years ago
Which of the scenarios best reflects the meaning of the term inflation targeting? a) In anticipation of the upcoming election, t
zvonat [6]

Answer:

b) A central bank is expected to achieve a 3% annual inflation rate

Explanation:

Inflation targeting is a type of monetary policy where the central bank of a country sets an inflation rate as its goal or target.

5 0
3 years ago
Other questions:
  • Samantha is an employee at a bank and uses a username and password to login to her computer. She ensures that she keeps these cr
    14·1 answer
  • When considering the gothic tradition in literary production alone, when does it emerge most predominantly?
    6·1 answer
  • At the time when products and services are produced or provided to customers, which functional area is responsible for ensuring
    8·1 answer
  • Sarah, an hr executive, observes that telework or telecommuting has been a rising trend. she considers developing a policy to al
    6·1 answer
  • Most four-year colleges want to see that you have participated in community service and extracurricular activities because?
    5·1 answer
  • Your Aunt Elsa has $500,000 invested at 6.5%, and she plans to retire. She wants to withdraw $40,000 at the beginning of each ye
    6·1 answer
  • Customers today want separate prices for each service element, and they also want the right to select the elements they want. Cu
    15·1 answer
  • Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of
    6·1 answer
  • Which of these inventory changes would be accounted for prospectively? Select one: a. FIFO to LIFO, but not LIFO to FIFO b. LIFO
    12·1 answer
  • An investment had a nominal return of 10.7 percent last year. If the real return on the investment was only 6.5 percent, what wa
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!