1. (Ignore income taxes in this problem.) Sibble Corporation is considering the
ID: 2499790 • Letter: 1
Question
1.
(Ignore income taxes in this problem.) Sibble Corporation is considering the purchase of a machine that would cost $460,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $63,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $90,000. The company requires a minimum pretax return of 11% on all investment projects. The net present value of the proposed project is closest to: (Round your NPV to nearest dollar.)
rev: 12_14_2012
-$48,150
-$45,570
-$79,210
-$16,210
2.
(Ignore income taxes in this problem.) Farah Corporation has provided the following data concerning a proposed investment project:
The company uses a discount rate of 11%. The working capital would be released at the end of the project.
Compute the net present value of the project. (Round your final answer to the nearest whole dollar.)
(Ignore income taxes in this problem.) Farah Corporation has provided the following data concerning a proposed investment project:
Explanation / Answer
Solution.
Calculation of N.P.V
Net present value = (45,928.00)
Answer is -$45,570
2.
Working capital deduct from annual cash inflow = $120,000 - $22,000 = $98,000
Year Cash flow PV factore 11% Present value 0 $ 460,000.00 1 $ 460,000.00 1 $ 90,000.00 0.900 $ 81,000.00 2 $ 90,000.00 0.811 $ 72,990.00 3 $ 90,000.00 0.731 $ 65,790.00 4 $ 90,000.00 0.658 $ 59,220.00 5 $ 90,000.00 0.593 $ 53,370.00 6 $ 90,000.00 0.534 $ 48,060.00 Scrap value $ 63,000.00 0.534 $ 33,642.00 Total $ 360,000.00 $ 414,072.00 Cash out flow $ 460,000.00 NPV $ (45,928.00)Related Questions
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