Sun National Bank is considering adding a new branch bank. They know that it will cost...

Sun National Bank is considering adding a new branch bank. They know that it will cost $1.25 million to build the branch and they believe that it will generate $220,000 per year for the next 30 years. Sun National Bank requires a return of 10% on all new projects it undertakes. What is this project’s net present value? (10 points) (Show all calculations for full credit. Simply entering a single value will earn no credit.)

Expert Solution

Calculation of NPV:

Time	Cashflow	PVF @10%	PV
-	-1250000	1.00	-12,50,000.00
1.00	220000	0.9091	2,00,000.00
2.00	220000	0.8264	1,81,818.18
3.00	220000	0.7513	1,65,289.26
4.00	220000	0.6830	1,50,262.96
5.00	220000	0.6209	1,36,602.69
6.00	220000	0.5645	1,24,184.26
7.00	220000	0.5132	1,12,894.79
8.00	220000	0.4665	1,02,631.62
9.00	220000	0.4241	93,301.48
10.00	220000	0.3855	84,819.52
11.00	220000	0.3505	77,108.66
12.00	220000	0.3186	70,098.78
13.00	220000	0.2897	63,726.16
14.00	220000	0.2633	57,932.88
15.00	220000	0.2394	52,666.25
16.00	220000	0.2176	47,878.41
17.00	220000	0.1978	43,525.83
18.00	220000	0.1799	39,568.93
19.00	220000	0.1635	35,971.76
20.00	220000	0.1486	32,701.60
21.00	220000	0.1351	29,728.73
22.00	220000	0.1228	27,026.11
23.00	220000	0.1117	24,569.19
24.00	220000	0.1015	22,335.63
25.00	220000	0.0923	20,305.12
26.00	220000	0.0839	18,459.20
27.00	220000	0.0763	16,781.09
28.00	220000	0.0693	15,255.54
29.00	220000	0.0630	13,868.67
30.00	220000	0.0573	12,607.88
			8,23,921.18
NPV is $823921.18

jeff jeffy answered 1 week ago

The Clearwater National Bank is planning to set up a new branch.This new branch is...

The Clearwater National Bank is planning to set up a new branch. This new branch is anticipated to generate 5 percent of the total business of the bank after it is opened. The bank also expects the return for this branch to be 15 percent with a standard deviation of 5 percent. Currently the bank has a 10 percent rate of return with a standard deviation of 5 percent. The correlation between the bank's current return and returns on the...

Second National Bank is considering adding 5 new ATM machines. Each machine costs $25,000 and installation...

Second National Bank is considering adding 5 new ATM machines. Each machine costs $25,000 and installation costs are $15,000 per machine. Second National Bank expects the new machines to save $0.33 per transaction on 250,000 transactions per year on the new machines. It also expects the new machines to last for 15 years. If the bank needs to earn 14 percent return on this investment, what is the net present value of this investment?

National Bank (see previous problem: pasted down below) is considering adding a second teller to the...

National Bank (see previous problem: pasted down below) is considering adding a second teller to the lunch-time situation to alleviate congestion. If the second teller is added, find the following: The average teller utilization The probability that there are 0 customers in the system The average number of customers in line The average time a customer waits before it seeing the teller The average time a customer spends in the service system If the tellers are paid $15/hour, is it...

National Bank (see previous problem) is considering adding a second teller to the lunch-time situation to...

National Bank (see previous problem) is considering adding a second teller to the lunch-time situation to alleviate congestion. If the second teller is added, find the following: The average teller utilization The average number of customers in line The average time a customer waits before it seeing the teller The average time a customer spends in the service system If the tellers are paid $15/hour, is it worth adding the second teller (Hint: answer the question by only looking at...

Third State Bank wants to add a new branch office. It hasdetermined that the cost...

Third State Bank wants to add a new branch office. It has determined that the cost of construction of the new facility will be $1.5 million with another $500,000 in organizational costs. The bank has estimated that it will generate $319,522 per year in net revenues for 20 years. If Third State requires a 17% return on its money, what is this project's net present value?

In 2009, New York First National Bank acquired New Jersey National Bank. In an exchange, New...

In 2009, New York First National Bank acquired New Jersey National Bank. In an exchange, New York First National Bank issued three series of preferred stock for New Jersey National Bank's net assets. Series Senior A (the most senior series), was given to four of New Jersey National Bank's creditors so that the debt could then be retired. The four preferred shareholders are listed as follows: two regional banks, one money center bank, and a non-financial corporation. Senior Series A...

Dunder-Mifflin is considering opening a new branch in Columbia with an initial fixed asset cost of...

Dunder-Mifflin is considering opening a new branch in Columbia with an initial fixed asset cost of $3.66 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $300,000. The project will not directly produce any sales but will reduce operating costs by $725,000 a year. The tax rate is 21 percent. The project will require $45,000 of inventory...

Carlos is fhe new assistant branch manager of a larger Florida-based bank and the branch manager...

Carlos is fhe new assistant branch manager of a larger Florida-based bank and the branch manager has asked him a question to test his knowledge. The question is which rate should the bank advertise on monthly-compounded loans, the nominal annual percentage rate or the effective annual percentage rate? Which rate should the bank advertise on quarterly-compounded savings accounts? Explain. As a consumer, which would you prefer to see and why?

National Cruise Line is considering the acquistion of a new ship that will cost $200,000. In...

National Cruise Line is considering the acquistion of a new ship that will cost $200,000. In this regard, the president of the company asked the CEO to analyze cash flows under two itineraries (Alaska and Canada). See following cash flows: Net Revenue: Alaska - 120,000,000, Canada-105,000,000 Less: Direct Program Expense: Alaska- 25,000,000, Canada- 24,000,000 Indirect Program Expense- Alaska- 20,000,000, Canada- 20,000,000 Nonoperating Expense- Alaska-21,000,000, Canada- 21,000,000 Add Back Depreciation- Alaska 115,000,000, Canada- 115,000,000 Cash flow per year: Alaska 169,000,000, Canada...

3) If a bank is going to open a new branch in a distant city, with...

3) If a bank is going to open a new branch in a distant city, with what inputs will the human resource department be concerned? What activities will the department need to undertake in the transition to a fully staffed and operating branch? What type of feedback do you think the department should seek after the branch has been operating for six months?

Question