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In: Finance

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 7 years. Calculate the​ project's NPV ​given

needs 7%
needs 8%
needs 13%
needs 10%
percentages need to be calculated with problem..

Solutions

Expert Solution

1.Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

  • Press the CF button.
  • CF0= -$5,000,000. It is entered with a negative sign since it is a cash outflow.
  • Cash flow for each year should be entered.
  • Press Enter and down arrow after inputting each cash flow.
  • After entering the last cash flow cash flow, press the NPV button and enter the cost of capital.
  • Press enter after that. Press the down arrow and CPT buttons to get the net present value.

Net present value at 7% cost of capital is $928,218.34.

2.Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

  • Press the CF button.
  • CF0= -$5,000,000. It is entered with a negative sign since it is a cash outflow.
  • Cash flow for each year should be entered.
  • Press Enter and down arrow after inputting each cash flow.
  • After entering the last cash flow cash flow, press the NPV button and enter the cost of capital.
  • Press enter after that. Press the down arrow and CPT buttons to get the net present value.

Net present value at 8% cost of capital is $727,007.07.

3. Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

  • Press the CF button.
  • CF0= -$5,000,000. It is entered with a negative sign since it is a cash outflow.
  • Cash flow for each year should be entered.
  • Press Enter and down arrow after inputting each cash flow.
  • After entering the last cash flow cash flow, press the NPV button and enter the cost of capital.
  • Press enter after that. Press the down arrow and CPT buttons to get the net present value.

Net present value at 13% cost of capital is -$135,128.52.

4. Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

  • Press the CF button.
  • CF0= -$5,000,000. It is entered with a negative sign since it is a cash outflow.
  • Cash flow for each year should be entered.
  • Press Enter and down arrow after inputting each cash flow.
  • After entering the last cash flow cash flow, press the NPV button and enter the cost of capital.
  • Press enter after that. Press the down arrow and CPT buttons to get the net present value.

Net present value at 10% cost of capital is $355,260.70.

In case of any query, kindly comment on the solution.

jeff jeffy answered 6 months ago
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