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
Veseljchak [2.6K]
3 years ago
9

An airline is considering a project of replacement and upgrading of machinery that would improve efficiency. The new machinery c

osts $400 today and is expected to last for 5 years with no salvage value. Straight line depreciation will be used. Project inflows connected with the new machinery will begin in one year and are expected to be $200 each year for 5 consecutive years and project outflows will also begin in one year and are expected to be $90 each year for 5 consecutive years. The corporate tax rate is 32% and the required rate of return is 9%. Calculate the project's net present value.
Business
1 answer:
Brrunno [24]3 years ago
3 0

$-9.48

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  

Cash flow = (revenue - cost - depreciation) (1 - tax rate) + depreciation

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

(400 - 0) / 5 = 80

(200 - 90- 80) x (1 - 0.32)  + 80 = $100.40

Cash flow in year 0 = $-400

Cash flow each year from year 1 to 5 = $100.40

I = 9%

NPV = $-9.48

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
For example, in the high end segment analysis on the left, total demand is 2554 and next years growth rate is 16.2% next years d
Evgen [1.6K]

Answer:

2968

Explanation:

total demand is 2554

growth rate is 16.2%

Next year total demand = 2554 + growth (total demand x 16.2%)

= 2554 + 2554*16.2/100

= 2554 + 413.748

= 2967.748

= 2968

8 0
3 years ago
Read 2 more answers
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate
Bezzdna [24]

Answer:

Option B is the correct answer,1.05

Explanation:

Present value index can be computed using the below formula:

present value index=present value of cash inflows/initial amount invested

present value of cash inflows=annual net cash flow*present value factor of annuity

annual net cash flow=$93,750

present value factor of annuity=4.212

present value of cash inflows=$93,750*4.212=$394,875.00  

initial amount invested is $375,000

present value index=$394,875.00/$375,000 =1.053

The present value index of this project is approximately 1.05,which is the option B in the multiple choices

3 0
3 years ago
Costs and benefits that should be ignored when making decisions are called ______ costs and benefits.
miskamm [114]

The first step in making a choice is to define the issue at hand. When making judgments, related costs and benefits should be evaluated. When making judgments, extraneous costs and advantages should be overlooked.

8 0
2 years ago
Read 2 more answers
Lily is planning to sell her home, which she bought seven years ago for a total of $168,000.the property value has increased by
abruzzese [7]
The answer is D. $251,700
7 0
3 years ago
Read 2 more answers
When a potential investment has a negative net present value,?
Pachacha [2.7K]
Net present value aka NPV is the gap between the present value of inflows and outflows of cash. This is used in project appraisal, to know whether a particular project with projected receipts and expenditures would be profitable considering current days. This is just a guide because actual occurrences may dramatically deviate from predictions.
5 0
3 years ago
Other questions:
  • A marketing company wants to estimate the proportion of consumers in a certain region of the country who would react favorably t
    13·1 answer
  • If a company owns more than 20% of the stock of another company and the stock is being held as a long-term investment, which met
    10·2 answers
  • Which of the following statements is true concerning stock splits? a.The total number of shares outstanding does not change afte
    10·1 answer
  • A reduction in transaction costs will tend to
    12·1 answer
  • A coase solution to a problem of externality insures ensures that a socially efficient outcome is to:
    5·1 answer
  • The CEO from headquarters has just arrived. You make some opening comments and she replies, "I'm glad to be here. I look forward
    11·1 answer
  • You are contemplating adding direct selling activities to your existing bricks-and-mortar retail business to increase sales. You
    5·2 answers
  • RLW-II Enterprises estimated that indirect manufacturing costs for the year would be $60 million and that 12,000 machine hours w
    7·1 answer
  • Kirkland Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the fir
    7·1 answer
  • 2. Which two of the following are most likely to be advantages of taking on a
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!