Net Present Value (NPV) 1. Calculate the NPV of a machine which is bought for $16,000,...

Transcribed Image Text:

Net Present Value (NPV) 1. Calculate the NPV of a machine which is bought for $16,000, sold at the end of year 5 for $2,000, and produces the following cash flows: year 1) +$2,600; year 2) +$1,950; year 3) +$1,350; year 4) +$1,500; year 5) +$1000, assume the cost of capital is 8%. 2. Calculate the NPV of a machine which is bought for $14,000, sold at the end of year 5 for $3,500, and produces the following cash flows: year 1) +$700; year 2) +$1,600; year 3) +$1,250; year 4) +$2,400; years 5 through 7) +$1,800 each, assume the cost of capital is 6.8%. 3. Calculate the NPV of a machine which is bought for $51,000, sold at the end of year 5 for $21,500, and produces the following cash flows: year 1) +$1,700; year 2) +$6,100; year 3) +$5,100; year 4) +$4,100; years 5 through 8) +3,100 each, assume the cost of capital is 11%. 4. Let's say a company is considering a project that requires an initial investment of $100,000. The project is expected to generate the following cash flows over the next five years. Assuming a discount rate of 10%, calculate the net present value. Year 1: $30,000, Year 2: $35,000, Year 3: $40,000, Year 4: $45,000, Year 5: $50,000 5. ABC Corporation is considering investing in a new manufacturing plant. The initial cost of the plant is $1,500,000. The plant is expected to generate cash flows of $400,000 per year for the next 7 years. After 7 years, the plant will be sold for $300,000. The company's discount rate is 8%. Calculate NPV. 6. Giant Corp is considering investing in a new production facility. The initial investment required for this project is $500,000. The facility is expected to generate cash flows over the next five years. Due to market conditions and operational uncertainties, the cash flows are projected to be uneven as follows: Year 1: $50,000 Year 2: $100,000 Year 3: $150,000 Year 4: $200,000 Year 5: $250,000. The discount rate for this project is 8%. Calculate the net present value (NPV) of this investment. Net Present Value (NPV) 1. Calculate the NPV of a machine which is bought for $16,000, sold at the end of year 5 for $2,000, and produces the following cash flows: year 1) +$2,600; year 2) +$1,950; year 3) +$1,350; year 4) +$1,500; year 5) +$1000, assume the cost of capital is 8%. 2. Calculate the NPV of a machine which is bought for $14,000, sold at the end of year 5 for $3,500, and produces the following cash flows: year 1) +$700; year 2) +$1,600; year 3) +$1,250; year 4) +$2,400; years 5 through 7) +$1,800 each, assume the cost of capital is 6.8%. 3. Calculate the NPV of a machine which is bought for $51,000, sold at the end of year 5 for $21,500, and produces the following cash flows: year 1) +$1,700; year 2) +$6,100; year 3) +$5,100; year 4) +$4,100; years 5 through 8) +3,100 each, assume the cost of capital is 11%. 4. Let's say a company is considering a project that requires an initial investment of $100,000. The project is expected to generate the following cash flows over the next five years. Assuming a discount rate of 10%, calculate the net present value. Year 1: $30,000, Year 2: $35,000, Year 3: $40,000, Year 4: $45,000, Year 5: $50,000 5. ABC Corporation is considering investing in a new manufacturing plant. The initial cost of the plant is $1,500,000. The plant is expected to generate cash flows of $400,000 per year for the next 7 years. After 7 years, the plant will be sold for $300,000. The company's discount rate is 8%. Calculate NPV. 6. Giant Corp is considering investing in a new production facility. The initial investment required for this project is $500,000. The facility is expected to generate cash flows over the next five years. Due to market conditions and operational uncertainties, the cash flows are projected to be uneven as follows: Year 1: $50,000 Year 2: $100,000 Year 3: $150,000 Year 4: $200,000 Year 5: $250,000. The discount rate for this project is 8%. Calculate the net present value (NPV) of this investment.