Rossiter Restaurants is analyzing a project that requires $180,000 of fixed assets. When the project ends, those assets are expected to have an aftertax salvage value of $45,000. How is the $45,000 salvage value handled when computing the net present value of the project? Select one: a. Not included in the net present value. b. Cash inflow prorated over the life of the project. c. Reduction in the cash outflow at time zero. d. Cash inflow for the year following

Rossiter Restaurants is analyzing a project that requires $180,000 of fixed assets. When the project ends, those assets are expected to have an aftertax salvage value of $45,000. How is the $45,000 salvage value handled when computing the net present value of the project? Select one: a. Not included in the net present value. b. Cash inflow prorated over the life of the project. c. Reduction in the cash outflow at time zero. d. Cash inflow for the year following

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5MC

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Calculate the net present value (NPV) before tax of investment A: a factory. Base your calculation on the following information: The investment cost is paid in full in quarter 0, and the cost of the factory is 100000. The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0 Only Basic jetpacks should be manufactured at the factory throughout its lifetime. There is no investment in research to streamline production or material consumption. Suppose the quarterly demand in the market is constant and given at P = 228 - 0.007 * Q, where P is price and Q is the number of jetpacks in demand. There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 193 each. You produce as much as you sell. The costs associated with the quarterly production at the factory are given at K = 158 * Q + 20000, where 158 * Q is direct labor cost and materials, and 20000 is quarterly maintenance…
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The goal of the local Agenda 21 Program was to help communities generate activities to reduce greenhouse gas emissions. According to its website, Environment Canada planned to sponsor individual and community actions to promote sustainable development and greener societies for $6 million in 1997, and $5.2 million in 1998, 1999, 2000, and 2001. a) Display each item along an appropriate timeline. b) Find the formula and compute the present value of the Agenda 21 Program in 2023 dollars (using a 5% annual discount rate), c) Suppose that this program is the only action Canada undertakes in this domain. If some economists at Environment Canada claimed that the Action 21 Program is worth undertaking, because the amount you calculated in b) is equivalent to the change in consumer surplus (in the relevant markets, say for medical care, etc.) due to living in a greener environment, would you agree or disagree with these economists? Explain.