Calculate the NPV of the proposed polyzone project, if the U.S. chemical company
ID: 2760688 • Letter: C
Question
Calculate the NPV of the proposed polyzone project, if the U.S. chemical company can start up polyzone production at 51 million pounds in year 1 rather than year 2. For year 4, assume the spread in year 3 still applies
Calculate the NPV of the proposed polyzone project, if the U.S. company makes a technological advance that reduces its annual production costs to $30.5 million. Competitors’ production costs do not change. For year 4, assume the spread in year 3 still applies.
Calculate the NPV of the proposed polyzone project, if the U.S. chemical company can start up polyzone production at 51 million pounds in year 1 rather than year 2. For year 4, assume the spread in year 3 still applies
c-1.Calculate the NPV of the proposed polyzone project, if the U.S. company makes a technological advance that reduces its annual production costs to $30.5 million. Competitors’ production costs do not change. For year 4, assume the spread in year 3 still applies.
Chegg Study Guided sc Week 10 Problem Set × G what are the NPVs at the × Finance Archive March x-G Cash Flows, (S) Project × G Error 400 (Bad Request) x f Liezto.mheducation.com/hm.tpx Consider the following information given below: Year OYear 1 Year 2 Year 3 Year 4 Year 5-10 100 Investment Required rate of return Production, millions of pounds per year Spread, $ per pound Production costs Transport Other costs 12% 51 1.31 102 1.31 102 1.21 102 1.06 1.31 1.31 31 31 31 a-1. Calculate the NPV of the proposed polyzone project, if spread in year 4 holds at $1.21 per pound. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Net present value 12.41 a.2. What's the right management decision? 8:06 PM 4/10/2016 Search the web and WindowsExplanation / Answer
Answer- (‘a-1)
Year
Production
(a)
Spread $ Per Pound
(b)
Total Spread
(a*b) = C
Production Cost
D
Transport
E
Other Cost
F
Total Inflow
C-D-E-F=G
PFV @12 %
H
Present Value of Cash Inflow
H*E
1
0
1.31
0
0
0
31
-31.00
0.89
-27.68
2
51
1.31
66.81
41
15
31
-20.19
0.80
-16.10
3
102
1.31
133.62
41
10
31
51.62
0.71
36.74
4
102
1.21
123.42
41
10
31
41.42
0.64
26.32
5
102
1.06
108.12
41
10
31
26.12
0.57
14.82
6
102
1.06
108.12
41
10
31
26.12
0.51
13.23
7
102
1.06
108.12
41
10
31
26.12
0.45
11.82
8
102
1.06
108.12
41
10
31
26.12
0.40
10.55
9
102
1.06
108.12
41
10
31
26.12
0.36
9.42
10
102
1.06
108.12
41
10
31
26.12
0.32
8.41
87.54
NPV = PV of Cash Inflow- Initial Investment
NPV= 87.54-100
NPV = -12.41
(‘a-2)
Year
Production
(a)
Spread $ Per Pound
(b)
Total Spread
(a*b) = C
Production Cost
D
Transport
E
Other Cost
F
Total Inflow
C-D-E-F=G
PFV @12 %
H
Present Value of Cash Inflow
H*E
1
51
1.31
66.81
0
0
31
35.81
0.89
31.97
2
102
1.31
133.62
41
15
31
46.62
0.80
37.17
3
102
1.31
133.62
41
10
31
51.62
0.71
36.74
4
102
1.31
133.62
41
10
31
51.62
0.64
32.81
5
102
1.06
108.12
41
10
31
26.12
0.57
14.82
6
102
1.06
108.12
41
10
31
26.12
0.51
13.23
7
102
1.06
108.12
41
10
31
26.12
0.45
11.82
8
102
1.06
108.12
41
10
31
26.12
0.40
10.55
9
102
1.06
108.12
41
10
31
26.12
0.36
9.42
10
102
1.06
108.12
41
10
31
26.12
0.32
8.41
206.93
NPV = PV of Cash Inflow- Initial Investment
NPV= 206.93 -100
NPV = 106.93
(‘c-1)
Year
Production
(a)
Spread $ Per Pound
(b)
Total Spread
(a*b) = C
Production Cost
D
Transport
E
Other Cost
F
Total Inflow
C-D-E-F=G
PFV @12 %
H
Present Value of Cash Inflow
H*E
1
0
1.31
0
0
0
31
-31.00
0.89
-27.68
2
51
1.31
66.81
30.50
15
31
-9.69
0.80
-7.72
3
102
1.31
133.62
30.50
10
31
62.12
0.71
44.22
4
102
1.31
123.42
30.50
10
31
62.12
0.64
39.48
5
102
1.06
108.12
30.50
10
31
36.62
0.57
20.78
6
102
1.06
108.12
30.50
10
31
36.62
0.51
18.55
7
102
1.06
108.12
30.50
10
31
36.62
0.45
16.57
8
102
1.06
108.12
30.50
10
31
36.62
0.40
14.79
9
102
1.06
108.12
30.50
10
31
36.62
0.36
13.21
10
102
1.06
108.12
30.50
10
31
36.62
0.32
11.79
143.97
NPV = PV of Cash Inflow- Initial Investment
NPV= 143.97 -100
NPV = 43.97
Year
Production
(a)
Spread $ Per Pound
(b)
Total Spread
(a*b) = C
Production Cost
D
Transport
E
Other Cost
F
Total Inflow
C-D-E-F=G
PFV @12 %
H
Present Value of Cash Inflow
H*E
1
0
1.31
0
0
0
31
-31.00
0.89
-27.68
2
51
1.31
66.81
41
15
31
-20.19
0.80
-16.10
3
102
1.31
133.62
41
10
31
51.62
0.71
36.74
4
102
1.21
123.42
41
10
31
41.42
0.64
26.32
5
102
1.06
108.12
41
10
31
26.12
0.57
14.82
6
102
1.06
108.12
41
10
31
26.12
0.51
13.23
7
102
1.06
108.12
41
10
31
26.12
0.45
11.82
8
102
1.06
108.12
41
10
31
26.12
0.40
10.55
9
102
1.06
108.12
41
10
31
26.12
0.36
9.42
10
102
1.06
108.12
41
10
31
26.12
0.32
8.41
87.54
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