Consider the following investment that has these cash flows and net present value. Using the above...

Consider the following investment that has these cash flows and net present value. Using the above information, what is the break even cash flow for year 0, year 1, and what is the pre-discounted value?

Year	0	1	2	3
Chase flow	-$16,775	$4575	$5500	$9180
Discount rate	6.50%
PV factor	1	.93897	.88166	.82785
NPV:	-$30.44

Solutions

Expert Solution

Initial investment = $ 16,775

In order to get breakeven at year 1, discounted cash flow for year1 should be equal to initial investment amount.

Discounted cash flow for year 1 = $ 16,775

Pre-discounted value of cash flow in year 1 = Initial investment/PV factor for year 1

= $ 16,775/0.93897

= $ 17,865.3205108 or $ 17,865.32

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Calculate the Net Present Value of the cash flows depicted in the table below using a...

Calculate the Net Present Value of the cash flows depicted in the table below using a cost of capital of {r81d}percent. year Cash Flow 0 -60 1 40 2 40 3 0

Consider a project with a net investment of $40,000 and the following net cash flows: Annual...

Consider a project with a net investment of $40,000 and the following net cash flows: Annual Cash Flow Year 1 $25,000, Year 2 $36,000, Year 3 $8,000. If the company's cost of capital is 5%, what would be the net present value of the project? (Using the financial calculator)

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...

Given the following cash flows and a discount rate of 9.5%, the net present value is...

Given the following cash flows and a discount rate of 9.5%, the net present value is closest to: CF0 $ (27.50) CF1 $ 8.75 CF2 $ 11.30 CF3 $ 14.90 St. Lawrence Ventures had cash flow from assets in 2014 of $1,875 (all values in thousands). The company paid interest expense of $370 and the cash flow to shareholders was $1,425. St. Lawrence: ct an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer....

What is the net present value of the following cash flows if the relevant discount rate...

What is the net present value of the following cash flows if the relevant discount rate is 9 percent? Year Cash Flow 0 -11,520 1 81 2 650 3 880 4 2300 5 15,800 A) $1,300.54 B) $1,913.12 C) $1,679.22 D) $1,022.87 E) $1,506.54 45) SNR is considering a project with an initial cost of $50,000. The project will produce cash inflows of $10,000 a year for the first two years and $12,000 a year for the following three years....

what is the net present value of a project with the following after tax cash flows...

what is the net present value of a project with the following after tax cash flows using a discount rate of 10% year 0 45,000 year 1 14,000 year 2 14,000 year 3 10,000 year 4 10,000 year 5 8,000 would you accept the project? ehat is payback period? what is the profitbility index?

Net present value. Quark Industries has a project with the following projected cash flows: Initial cost:...

Net present value. Quark Industries has a project with the following projected cash flows: Initial cost: $210,000 Cash flow year one: $25,000 Cash flow year two: $72,000 Cash flow year three: $146,000 Cash flow year four: $146,000 a. Using a discount rate of 11% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 13%? c. Should the company accept...

Net present value. Quark Industries has a project with the following projected cash flows: Initial cost:...

Net present value. Quark Industries has a project with the following projected cash flows: Initial cost: $270,000 Cash flow year one: $24,000 Cash flow year two: $79,000 Cash flow year three: $155,000 Cash flow year four: $155,000 a. Using a discount rate of 10% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 13%? c. Should the company accept...

Net present value. Lepton Industries has a project with the following projected cash flows: Initial cost:...

Net present value. Lepton Industries has a project with the following projected cash flows: Initial cost: $460,000 Cash flow year one: $132,000 Cash flow year two: $200,000 Cash flow year three: $191,000 Cash flow year four: $132,000 a. Using a discount rate of 11% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 13%? c. Should the company accept...

Subjects