Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $3,500,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.1million. Thus, in year 9 the investment cash inflow totals $4,600,000. Calculate the project's NPV using a discount rate of 7 percent.
Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $3,500,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.1million. Thus, in year 9 the investment cash inflow totals $4,600,000. Calculate the project's NPV using a discount rate of 7 percent.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section10.A: Mutually Exclusive Investments Having Unequal Lives
Problem 2P
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Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $3,500,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.1million. Thus, in year 9 the investment
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