Question: DJ Enterprise is considering a project with an initial cost of P5,000 and net cash flows of P2,000 for the next three years. The expected

DJ Enterprise is considering a project with an initial cost of P5,000 and net cash flows of P2,000 for the next three years. The expected abandonment cash inflows for years 0, 1, 2, and 3 are P5,000, P3,000, P2,500 and P 0. The enterprise's cost of capital is 10%.

Compute in three cases using Microsoft Excel

NPV of project if kept for three years
NPV of project if abandoned after Year 1
NPV of project if abandoned after Year 2

What should be the decision of the enterprise considering the three cases?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

ABC Company is considering a project with an initial cost of $5000 and net cash flow of $2000 for next three years. The expected abandonment cash flows for years 0,1,2 and 3 are $5000, $3000, $2500,...

The real return on an investment in a given year was 6.0%, while its nominal return was 11.3%. What must have been the inflation rate during the year? Why does the rate of return on an investment...

Becker industries is considering investing in new navigation system equipment for it trucking fleet. CHAPTER 10 - Journal Exercise Capital Budgeting Decisions Payback Period: Measure the time it...

a) Exercise 1: What is the payback period in years? Round to two places beyond the decimal place. See circle on the printed exercise. EXERCISE 1: Becker Industries is considering investing in new...

EXERCISE 1: Becker Industries is considering investing in new navigation system equipment for its trucking fleet. The initial investment is $180,000 and is expected to result in unequal net cash...

QUESTION ONE (20 Marks) INFORMATION Busta Limited plans to manufacture bar fridges and the following information is applicable: Estimated sales for the year 5 000 units at R3 400 each Estimated costs...

Question Help P26-31A (similar to) Leches Company operates a chain of sandwich shops. (Click the icon to view additional information) Read the requirements Click the icon to view Present Value of $1...

Sign MBL5903-2017-10-E-1 PAST EXA X + File C:/Users/daisy/Desktop/MBL5903/MBL5903-2017-10-E-1%20PAST%20E... Question 1 [14 marts) You plan to Invest in the Kish Hedge Fund, which has total capital of...

Just need answer and short explain. Thanks FNCE20001 Business Finance Semester 1, 2015 Question 1 12 3 = 36 marks This question has thirteen (12) parts. For each part, clearly indicate your answer as...

The primary principle of Total Quality Management (TQM) is that OA. Quality is the job of everyone in an organization - all levels from executives to line workers Quality is primarily the job of the...

A scientist measures the mass of fish over the course of 100 days, and repeats the experiment at three different levels of salinity: 0%, 2% and 5%. Identify the variables and parameters in the above...

27. If the government set a price ceiling of 25 cents for a loaf of bread, the most likely consequence would be . ( LO5 , 6 , 7 ) a) a surplus of bread b) no one would go hungry c) most Americans...

3. The following information is known about a project. Activity Immediate Predecessor (s) A B D E F G H 1 Activity Time (days) 2 3 5 2 1 8 3 5 4 7 A A B B B.C D.E F F G.H.I a) Draw the network...

8. Set a goal that you really want to achieve in the near future, lets say 12 years. How does this goal fit in relation to the form roles and values above? What role and what value was it that...

7. Fill out the form below. Only the most important roles and your basic values are to be filled.

10. Try to remember the last communication you entered into. How many times did you fill in information that the other person did not convey? How many times did you speak before the other person...