Gubanich Sportswear is considering building a new factory to produce aluminum baseball bats. This project would...

Gubanich Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $5,000,000 and would generate annual free cash inflows of $1,100,000 per year for 6 years. Calculate the project's NPV given:

a. A required rate of return of 9 percent

b. A required rate of return of 11 percent

c. A required rate of return of 13 percent

d. A required rate of return of 18 percent

Expert Solution

Use NPV function in EXCEL to find the NPV

=NPV(rate,Year1 to Year6 cashflows)-Year0 cashflow

a. =NPV(9%,Year1 to Year6 cashflows)-5000000=-$65489.6

b. =NPV(11%,Year1 to Year6 cashflows)-5000000=-$346408.4

c. =NPV(13%,Year1 to Year6 cashflows)-5000000=-$602695.2

d.=NPV(18%,Year1 to Year6 cashflows)-5000000=-$1152637.2

		Cashflows
	Year0	-5000000
	Year1	1100000
	Year2	1100000
	Year3	1100000
	Year4	1100000
	Year5	1100000
	Year6	1100000
9%	NPV	-65489.6
11%	NPV	-346408.4
13%	NPV	-602695.2
18%	NPV	-1152637.2

jeff jeffy answered 1 year ago

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Gubanich Sportswear is considering building a new factory to produce aluminum baseball bats. This project would...

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