Question

In: Finance

How much could NPV be affected by a worst-case scenario of 25 percent reduction from the...

How much could NPV be affected by a worst-case scenario of 25 percent reduction from the $3 million in expected annual cash flows on a five-year project with 10 percent cost of capital compounded quarterly?

A)$4,317,832

B)$3,249,557

C)$2,843,090

D)$2,815,611

Solutions

Expert Solution

Effective annual rate = 10.38%
(1+10%/4)^4-1
Annual cash flow reduction = 750000
3000000*25%
Present value of cash flow effect
put in calculator
FV 0
PMT -750000
I 10.38%
N 5
Compute PV $2,815,611
Ans = option D) $2,815,611

Related Solutions

I need the exact answer for: Best-case NPV: Worst-case NPV McGilla Golf has decided to sell...
I need the exact answer for: Best-case NPV: Worst-case NPV McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $855 per set and have a variable cost of $415 per set. The company has spent $320,000 for a marketing study that determined the company will sell 70,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 13,400 sets of its high-priced clubs. The...
Q. In the worst-case scenario related to casing collapse pressure, explain from a practical point of...
Q. In the worst-case scenario related to casing collapse pressure, explain from a practical point of view why the casing internal pressure is considered partially or completely empty. In other words, under what conditions the casing string can be empty or partially empty. (Note: This question needs to be answered in the context of Petroleum Drilling Engineering advance level)
QUESTION 8 In a base-case scenario, the output is determined by assuming a. worst values that...
QUESTION 8 In a base-case scenario, the output is determined by assuming a. worst values that can be expected for the random variables of a model. b. the most likely values for the random variables of a model. c. the mean trial values for the random variables of a model. d. best values that can be expected for the random variables of a model. e. None of the above 1.5 points    QUESTION 9 The points where constraints intersect on...
Potentially, how much 25 ̊C water could you boil to gas using the energy released from...
Potentially, how much 25 ̊C water could you boil to gas using the energy released from the aerobic fermentation of 1 kg of glucose? Assume a Cp for water of 75 J/(mol K) and a heat of vaporization of water of 41 kJ / mol.
In the worst-case scenario, you've got an elevator with a mass 2420 kg moving a speed...
In the worst-case scenario, you've got an elevator with a mass 2420 kg moving a speed 4.29 m/s when it reaches the bottom of the shaft. Your first idea is to put a spring, with spring constant 1.068×104 N/m, at the bottom of the shaft. a)Assuming the spring obeys Hooke's Law perfectly, how far will it compress to stop the elevator? b)When the elevator comes to a stop with the spring compressed, what is the net force on the elevator?...
You invested $1,350 in an account that pays 3 percent simple interest. How much more could...
You invested $1,350 in an account that pays 3 percent simple interest. How much more could you have earned over a 4-year period if the interest had compounded annually? $7.81 $7.13 $16.94 $7.07 $7.44
The Basics of Capital Budgeting: NPV The net present value (NPV) method estimates how much a...
The Basics of Capital Budgeting: NPV The net present value (NPV) method estimates how much a potential project will contribute to -Select-business ethicsshareholders' wealthemployee benefitsCorrect 1 of Item 1, and it is the best selection criterion. The -Select-smallerlargerCorrect 2 of Item 1 the NPV, the more value the project adds; and added value means a -Select-higherlowerCorrect 3 of Item 1 stock price. In equation form, the NPV is defined as: CFt is the expected cash flow at Time t, r...
How much has the financial crisis 2020 affected globalization and how is it looking in the...
How much has the financial crisis 2020 affected globalization and how is it looking in the future?
How has the Impact of Industry from the 1750s-1980s affected: Agriculture, transportation, banking. If you could...
How has the Impact of Industry from the 1750s-1980s affected: Agriculture, transportation, banking. If you could give an answer that's at least 3 paragraphs, that would be great! This is a business history question, but I am not able to select any type of history as the subject.
Describe how the individual in your scenario will be affected by inflation. Consider the effects of...
Describe how the individual in your scenario will be affected by inflation. Consider the effects of inflation, deflation, and unexpected inflation. Theresa Auto worker / Union member My name is Theresa. I’m an auto worker at the car factory. My company is high tech and has automated our production line. I have an important job because the buttons I push determine how your car interior is made. Yep, one button selects the type of seats, another button determines the color...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT