The Horizon Company will invest $52,000 in a temporary project that will generate the following cash...

The Horizon Company will invest $52,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Year	Cash Flow
1		$	17,000
2			32,000
3			22,000

The firm will also be required to spend $11,000 to close down the project at the end of the three years.

a. Compute the net present value if the cost of capital is 9 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)

b. Should the investment be undertaken?

Solutions

Expert Solution

I HAVE USED PVIF TABLE TO SOLVE THE PROBLEM, NO EXCEL FUNCTION IS USED.

jeff jeffy answered 3 months ago

Next > < Previous

Related Solutions

Hamilton Control Systems will invest $90,000 in a temporary project that will generate the following cash...

Hamilton Control Systems will invest $90,000 in a temporary project that will generate the following cash inflows: Year Cash Flow $23,000 38,000 60,000 The firm will also be required to spend $15,000 to close the project at the end of the three years. a. Compute the net present value if the cost of capital is 10 percent. (Round the intermediate calculations to the nearest whole dollar. Negative answer should be indicated by a minus sign. Round the final answer to...

Alex Company is planning to invest in a project. The following information is provided: Initial cash...

Alex Company is planning to invest in a project. The following information is provided: Initial cash outflow = $75,000 Expected future cash flows = $20,000 every year for the next 5 years Alex’s before-tax cost of debt = 5% Tax rate = 30% Next year’s expected dividend = $1 per share Current price of the stock = $25 Expected growth rate = 4% Target capital structure = 70% equity and 30% debt Flotation costs for equity = 4% Calculate the...

A company is considering a project that costs $150,000 and is expected to generate cash flows...

A company is considering a project that costs $150,000 and is expected to generate cash flows of $50,000, $52,000, $53,000 in the coming three years. Which of the following is correct? A. The project must have a postive net present value. B. The project must be accepted by the payback rule. C. The project must be accepted by the discounted payback rule. D The project must have an internal rate of return lower than 2% E. None of the above....

AS is evaluating a project that is expected to generate the following cash flow stream: Expected...

AS is evaluating a project that is expected to generate the following cash flow stream: Expected Cash Flow Now -R 100,000 End-of-year 1 R 50,000 End-of-year 2 R 50,000 End-of-year 3 R 50,000 Required: 2.1. If the project’s cost of capital is 12 per cent, what is the present value of the project’s expected cash flow stream? 2.2. What is the net present value of the project?

LM Company is considering investing in a new project that will generate cash inflows of $45,000...

LM Company is considering investing in a new project that will generate cash inflows of $45,000 every year for the ten-year life of the project. Investing in this new project will require the purchase of a new machine, which will cost $200,000. The machine will have a salvage value of $15,000 at the end of ten years, but will require a repair costing $6,000 at the end of year four and a repair costing $10,000 at the end of year...

LM Company is considering investing in a new project that will generate cash inflows of $45,000...

Starwood Ltd is considering to invest in a new project. Theproject is expected to generate...

Starwood Ltd is considering to invest in a new project. The project is expected to generate cash flows of $1,000 every four years forever with the first cash flow starting in year 2 and $4,000 every four years forever with the first cash flow starting in year 4. Suppose similar investments are paying a return of 10% p.a. compounded quarterly. How much should Starwood Ltd be prepared to pay for this project?

Aerospace Dynamics will invest $180,000 in a project that will produce the following cash flows. The...

Aerospace Dynamics will invest $180,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. (Note that the fourth year’s cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow 1. $ 62,000 2. 74,000 3. 66,000 4. (63,000 ) 5. 140,000 a. What is the net present value of the project? (Negative amount should be indicated...

Aerospace Dynamics will invest $150,000 in a project that will produce the following cash flows. The...

Aerospace Dynamics will invest $150,000 in a project that will produce the following cash flows. The cost of capital is 10 percent. (Note that the fourth year’s cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow 1 $ 45,000 2 57,000 3 65,000 4 (48,000 ) 5 140,000 a. What is the net present value of the project?

You are offered to invest in a project with the following cash flow profile. What is...

You are offered to invest in a project with the following cash flow profile. What is the future worth (i.e., at t = 10) of this investment to you if your MARR is 7%? t 0 1 2 3 4 5 6 7 8 9 10 $ in million -10 0 0 0 0 5 5 5 5 5 7.5 A. $20.1 million B. $18.6 million C. $16.1 million D. $14.6 million My answer is B but I just want...

Subjects