Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
REAL OPTIONS Use a spreadsheet model to evaluate the project analyzed in problem 13-7.
a.
To Determine: The expected NPV of the project if the tax is imposed.
Introduction: The net present value is also termed as the discounted cash flow approach is a mainstream capital budget method that considers the time value of cash. It utilizes net present value of the investment as the base to accept or reject a projected investment in projects like buying of new machine, buying of stock or inventory etc.
Determine the net present value if the tax is imposed
Using a excel spreadsheet, the net present value if the tax is imposed is determined as -$2,113,481.31.
Excel Spreadsheet:
b.
To Determine: The expected NPV of the project if the tax is not imposed.
c.
To Determine: The expected NPV of the project if the management proceeds with it today.
d.
To Determine: Whether the existence of the abandonment option affect the company’s decision to proceed with the project today.
e.
To Determine: The most the company would pay today.
Chapter 13 Solutions
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