Expected NPV
Not what you're looking for?
Golden Corporation is considering the purchase of new equipment costing $200,000. The expected life of the equipment is 10 years. It is expected that the new equipment can generate an increase in net income of $35,000 per year for the next 10 years. The probabilities for the increase in net income depend on the state of the economy.
Probabilities After Tax Net Income Expected Value of EAT
Recession .3 ($15,000)
Normal .5 $25,000
Boom .2 $35,000
The equipment will be depreciated using straight line depreciation. Golden's cost of capital is 14%. What is the expected NPV? Should they purchase the new equipment?
Purchase this Solution
Solution Summary
Solution shows calculations of expected NPV.
Purchase this Solution
Free BrainMass Quizzes
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Motivation
This tests some key elements of major motivation theories.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Introduction to Finance
This quiz test introductory finance topics.