Question

In: Finance

Avalon Aviation Products is evaluating a new project. What is the net present value of this...

Avalon Aviation Products is evaluating a new project.
What is the net present value of this project if the discount rate is 12% and the net cash flows are as per the following table?
Year
Cashflow
0
-$5334
1
$8301
2
$4682
3
$9112
4
$20025
5
$24873

Solutions

Expert Solution

NPV is calculated below:
Year Cash flow PVIF at 12% PV at 12%
0 $             -5,334 1 $         -5,334
1 $               8,301 0.89286 $           7,412
2 $               4,682 0.79719 $           3,732
3 $               9,112 0.71178 $           6,486
4 $            20,025 0.63552 $         12,726
5 $            24,873 0.56743 $         14,114
$         39,136
NPV = $            39,136

jeff jeffy answered 7 months ago
Next > < Previous

Related Solutions

1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Cold Goose Metal Works Inc. is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $450,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $325,000 Year 2...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,000,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $300,000 Year 2 $475,000...
What are the advantages of evaluating projects using the net present value and internal rate of...
What are the advantages of evaluating projects using the net present value and internal rate of return methods instead of the payback and accounting rate of return methods?
What is the net present value of a project that requires an initial investment of $76,000...
What is the net present value of a project that requires an initial investment of $76,000 and produces net cash flows of $22,000 per year for 7 years? Assume the discount rate is 15 percent. a. $91,520 b. $15,520 c. $78,000 d. $167,474
1. a) What is the net present value of a project that has upfront costs of...
1. a) What is the net present value of a project that has upfront costs of $5 million and pays end of the year cash flows of $1 million in one year, $2 million in two years, and $3 million in three years if the annual discount rate for the project is 3 percent? Show how much money you would have at the end of three years if you bought the project and what you would have instead if you...
What is the net present value of a project that has an initial cash outflow of...
What is the net present value of a project that has an initial cash outflow of $-13,000, at time 0, and the following cash flows for years 1-4? The required return is 10.0%. DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ENTER YOUR ANSWER TO THE NEAREST DOLLAR (e.g. 1250). Year Cash Flows 1 $3,950 2 $3,750 3 $5,900 4 $6,400
1. If the net present value of project A is +$70, and of project B is...
1. If the net present value of project A is +$70, and of project B is +$50, then the net present value of the combined project is: Group of answer choices +$80 +$140 None of the above +$60 +$120 +$20 2. Are there problems with using the payback rule? The following are disadvantages of using the payback rule except: Group of answer choices The payback rule does not have the value additive property The payback rule does not use the...
What are the payback and NPV (net present value) methods of evaluating capital projects? Which is...
What are the payback and NPV (net present value) methods of evaluating capital projects? Which is considered the best evaluation method, and why is one better than the other?
What is the net present value of the stadium project, which is a 3-year project where...
What is the net present value of the stadium project, which is a 3-year project where Fairfax Pizza would sell pizza in the baseball stadium? The project would involve an initial investment in equipment of 160,000 dollars today. To finance the project, Fairfax Pizza would borrow 160,000 dollars. The firm would receive 160,000 dollars from the bank today and would pay the bank 206,400 dollars in 3 years (consisting of an interest payment of 46,400 dollars and a principal payment...
Net Present Value Project Details Starlight Industries has developed a project to produce a new product:...
Net Present Value Project Details Starlight Industries has developed a project to produce a new product: Widgets. To develop the widgets, Starlight Industries needs to purchase a new machine that will help develop the widgets. Starliper Industries is deciding between two different machines, “New Tech” and “Standard Classic” that have the capabilities necessary to develop the widgets. Your job will be to compare the two different machines using net present value. The company has produced the following information regarding the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT