(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $11,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $4,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $0.9 million. Thus, in year 6 the investment cash inflow totals $4,900,000. Calculate the project's NPV using a discount rate of 8 percent. If the discount rate is 8 percent, what is the project's NPV . (Round to the nearest dollar.)
(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $11,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $4,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $0.9 million. Thus, in year 6 the investment cash inflow totals $4,900,000. Calculate the project's NPV using a discount rate of 8 percent. If the discount rate is 8 percent, what is the project's NPV . (Round to the nearest dollar.)
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section10.A: Mutually Exclusive Investments Having Unequal Lives
Problem 2P
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(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $11,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to
$4,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $0.9 million. Thus, in year 6 the investment cash inflow totals $4,900,000.
Calculate the project's NPV using a discount rate of 8 percent.
If the discount rate is 8 percent, what is the project's NPV
.
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