(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of$11,000,000on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to$4,000,000per year for each of the next6years. In year6the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at$1.1million. Thus, in year6the investment cash inflow totals$5,100,000.Calculate the project's NPV using a discount rate of6percent.If the discount rate is6percent, then the project's NPV is$nothing.(Round to the nearest dollar.)

Net present value (NPV) is used to determine the present value of all future cash flows. Net present…

Answered: then the project's NPV is $nothing.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 28BEB: Net Present Value Talmage Inc. has just completed development of a new printer. The new product is...

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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

years. In year

the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at

$1.1

million. Thus, in year

the investment cash inflow totals

$5,100,000.

Calculate the project's NPV using a discount rate of

percent.

If the discount rate is

percent, then the project's NPV is

$nothing.

(Round to the nearest dollar.)

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