1. Rappaport Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected.
Year:0 1 2 3 4
Cashflows:-$1,000 $400 $405 $410 $415
Consider the following cashflows on two not mutually exclusive investments.
Year Investment A Investment B
0 -$100 -$100
1 44 69
2 56 51
3 65 32
The required return is 15%. The investments are not mutually exclusive.
a) Calculate the NPV and
1) a) Tropical Sweets is considering a project that will cost $70 million and will generate expected cashflows of $30 million per year for the next three years. The cost of capital for this type of project is 10 percent and the risk free rate is 6 percent. After discussions with the marketing department, you learn that there
Sherry Bishop of Thayer Industries is considering investing in a capital project that costs $1.2 million. The project is expected to generate after-tax operating cashflows equal to $500,000 in the first year and declining by $100,000 per year until the end of the project's life in five years. Assume that Thayer's nominal discou
Watson Leisure Time Sporting Goods has improved operations over time and the company needs to make a decision related to an equipment decision .
The company plans to purchase a new piece of equipment (to be used over a six year period) for $320,000.
Assume the cashflowsand depreciation (based upon the use of the 5-year MAC
Borden Books is interested in purchasing a computer system to use for the next 10 years. Currently, Borden is considering two mutually exclusive systems, System S and System L.
System S has an up-front cost of $3 million at t = 0 and will produce positive cashflows of $2.5 million per year for two years (at t = 1 and 2).
30. Which one of the following statements concerning net present value (NPV) is correct?
A. An investment should be accepted if, and only if, the NPV is exactly equal to zero.
B. An investment should be accepted only if the NPV is equal to the initial cash flow.
C. An investment should be accepted if the NPV is positive and