Halcyon Lines Inc. is considering purchasing a new ship for $8 million now. The forecasted cash...
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Halcyon Lines Inc. is considering purchasing a new ship for $8 million now. The forecasted cash inflows for the project are $1 million a year for 15 years. A major refit costing $2 million will be required at the end of Year 5 and Year 10. After 15 years, the ship is expected to be sold at $1.5 million, ignore any depreciation and tax considerations. What is the NPV of the project if the relevant discount rate is 8% per year? Should you go ahead with the project? [Hint: Just set up the NPV formula that includes all the relevant cash inflows and outflows.] Halcyon Lines Inc. is considering purchasing a new ship for $8 million now. The forecasted cash inflows for the project are $1 million a year for 15 years. A major refit costing $2 million will be required at the end of Year 5 and Year 10. After 15 years, the ship is expected to be sold at $1.5 million, ignore any depreciation and tax considerations. What is the NPV of the project if the relevant discount rate is 8% per year? Should you go ahead with the project? [Hint: Just set up the NPV formula that includes all the relevant cash inflows and outflows.]
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Heres how to calculate the NPV of the project and determine whether to proceed Formula NPV Cash Flow ... View the full answer
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Posted Date:
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