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1. Managers of CVS Pharmacy are considering a new project. This project would be a new...

1. Managers of CVS Pharmacy are considering a new project. This project would be a new store in Odessa, Texas. They estimate the following expected net cash flows if the project is adopted.

  • Year 0: ($1,250,000)
  • Year 1: $200,000
  • Year 2: $500,000
  • Year 3: $400,000
  • Year 4: $300,000
  • Year 5: $200,000

Suppose that the appropriate discount rate for this project is 6.7%, compounded annually.

Calculate the net present value for this proposed project.

Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. If the NPV is negative, include a minus sign. Do not type the $ symbol.

2. Managers at Terlingua Drilling identify a potential new drilling project. They estimate the following expected net cash flows if the project is adopted.

  • Year 0: ($1,250,000)
  • Year 1: $100,000
  • Year 2: $400,000
  • Year 3: $400,000
  • Year 4: $200,000
  • Year 5: $200,000
  • Year 6: $300,000
  • Year 7: $100,000

Suppose that the appropriate discount rate for this project is 12%, compounded annually.

Calculate the net present value for this proposed project.

Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. If the NPV is negative, include a minus sign. Do not type the $ symbol.

Solutions

Expert Solution

Calculate the Net present value as follows:

Formulas:

jeff jeffy answered 9 months ago
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