2. Rearden Metal needs to order a new blast furnace that will be delivered in one...

2. Rearden Metal needs to order a new blast furnace that will be delivered in one year. The $1,000,000 price for the blast furnace is due in one year when the new furnace is installed. The blast furnace manufacturer offers Rearden Metal a discount of $60,000 if they pay for the furnace now. If the interest rate is 7%, then the NPV of paying for the furnace now is closest to:

Expert Solution

NPV :
NPV is the difference between Present value of Cash Inflows and Present value of cash outflows.

NPV = PV of Cash Inflows - PV of Cash Outflows
If NPV > 0 , Project can be accepted
NPV = 0 , Indifference point. Project can be accepted/ Rejected.
NPV < 0 , Project will be rejected.

PV of future CF = $ 1000000 / 1.07

= $ 934579.44

PV of CF if paid today = $ 940000 [ $ 1000000 - $ 60000 ]

NPV = $ 934579.44 - $ 940000

= -$ 5420.56

It is not advicable topay today.

jeff jeffy answered 2 years ago

Rearden Metal is considering the purchase of a new blast furnace costing a total of $5...

Rearden Metal is considering the purchase of a new blast furnace costing a total of $5 million dollars. This furnace will qualify for MACRS 5-year depreciation (20%, 32%, 19.20%, 11.52%, 11/52%, 5.76%) . However, because of Rearden's substantial tax loss carry forwards, Rearden estimates its marginal tax rate to be only 10% over the next five years. Since Rearden will get very little tax benefit from the depreciation expense, they consider leasing the furnace instead. Suppose that Rearden and the...

Two years ago, a steel company installed a blast furnace for a total of $ 19,200....

Two years ago, a steel company installed a blast furnace for a total of $ 19,200. Due to a technological change, another type of more efficient furnace can be purchased for $ 208,000 with a savings of $ 38,000 per year of fuel compared to the current frontier. Maintenance costs are estimated at $ 8,000 and $ 4800 per year for the new furnace and the current furnace, respectively. For accounting purposes, taxes and depreciation charges are calculated by the...

Outline the chemical reactions which occur in the iron blast furnace as the burden descends from...

Outline the chemical reactions which occur in the iron blast furnace as the burden descends from the top of the furnace, until it reaches the top of the slag pool in the hearth. Refer to both direct and indirect reduction. Explain in terms of chemistry and heat balances why the furnace is considered to consist of three distinct zones (Preheating zone, Indirect reduction zone, Direct reduction and melting zone).

Consider an iron blast furnace charged with iron ore, limestone (CaCO3) and coke. The weight analyses...

Consider an iron blast furnace charged with iron ore, limestone (CaCO3) and coke. The weight analyses of the charge is as follows: Ore: Fe2O3, 80%; SiO2, 12%; MnO, 1%; Al2O3, 3%; H2O, 4%. Limestone: SiO2, 4%; H2O,1%; CaCO3 95%. Coke: SiO2, 10% ; C, 90%. The ultimate weight analysis of the pig iron gives 93.8% Fe, 4% C, 1.2% Si and 1% Mn. For every ton of pig iron produced, 1750 kg of iron ore and 500 kg of limestone...

A customer’s order is delivered (received by the customer) on September 10, 2019. This order was...

A customer’s order is delivered (received by the customer) on September 10, 2019. This order was placed with the company on June 5, 2019, and received by the manufacturing department on June 20, 2019. Actual production on the order began on July 10, 2019, and was completed August 10, 2019. Based on this information, calculate the following for this order: (a) total customer-response time (CRT), (b) order receipt time, (c) manufacturing lead (cycle) time, (d) manufacturing wait time, (e) manufacturing...

1. In order to determine the size of a home-heating furnace, it is necessary to estimate...

1. In order to determine the size of a home-heating furnace, it is necessary to estimate the heat loss during the coldest day in winter. Provide the rates of heat loss per unit surface area for the following surfaces commonly encountered in house construction. You may assume an inside air temperature of 25°C, an outside temperature of -5°C, and heat transfer coefficients of 20 Wm-2K-1 and 5 Wm-2K-1 between air and the outside and inside surfaces, respectively. The thermal conductivities...

Question One) Discuss what needs to be satisfied in order for the distribution of the sample...

Question One) Discuss what needs to be satisfied in order for the distribution of the sample proportion to be considered approximately normal. From what probability distribution does this requirement come from? Question 2 ) Discuss the requirements that need to met in order to state that the distribution of the sample mean follows a normal distribution.

Yummy food received an advance payment of OMR 1,000 for the order to be delivered after...

Yummy food received an advance payment of OMR 1,000 for the order to be delivered after two months. Write a short note on unearned income/ income received in advance with a literature review and by providing examples.?

Suppose a pizzeria called Sticky Dough gets an order for 5 pizzas to be delivered to...

Suppose a pizzeria called Sticky Dough gets an order for 5 pizzas to be delivered to some VIP. This customer has an evil reputation for being extremely picky and there is only a 60% chance that he’ll accept any particular pizza. Because this is an important gig for Sticky Dough, they decide to send extra pizzas in case some are rejected. What is the minimum number of pizzas that will have to be sent to be 95% sure that at...

CandleLine is a business that sells designer candles via the Internet and has the order delivered...

CandleLine is a business that sells designer candles via the Internet and has the order delivered Below ts the code fora GUI Study the code and answer the questions that follow import java awt *, import java applet *, import java awt event *, import java text DecimalFormat, public class CandleApplet extends Applet amplements ItemListener { //Create components for applet Label companyNameLabel = new Label ("CandleLine--Candles On-line"), Label priceLabel=new Label ("Please enter the total amount of your order "), TextField...

Question