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Sensitivity analysis: San Lucas Corporation San Lucas Corporation is considering investment in robotic machinery based upon...
Sensitivity analysis: San Lucas Corporation
San Lucas Corporation is considering investment in robotic machinery based upon the following estimates:
| Cost of robotic machinery | $4,000,000 |
| Residual value | 300,000 |
| Useful life | 10 years |
a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of $700,000. Use the present value tables appearing in Exhibit 2 and 5 of this chapter.
Net present value $
b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of $500,000, $700,000, and $900,000. Use the present value tables (Exhibit 2 and 5) provided in the chapter in determining your answer. If required, use the minus sign to indicate a negative net present value.
| Annual Net Cash Flow | $500,000 | $700,000 | $900,000 |
| Net present value | $ | $ | $ |
c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar.
Annual Net Cash Flow $
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Sensitivity analysis: San Lucas Corporation San Lucas Corporation is considering an investment in robotic machinery based...
Sensitivity analysis: San Lucas Corporation
San Lucas Corporation is considering an investment in robotic
machinery based upon the following estimates:
Cost of robotic machinery
$4,000,000
Residual value
300,000
Useful life
10 years
a. Determine the net present value of the
equipment, assuming the desired rate of return of 10% and annual
net cash flows of $700,000. Use the present value tables appearing
in Exhibit 2 and 5 of this chapter.
Net present value $417,300
b. Determine the net present value...
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