Consider the following information given below: Calculate the NPV of the propose

Question

Consider the following information given below: Calculate the NPV of the proposed polyzone project, if spread in year 4 holds at $1.24 per pound. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) What's the right management decision? The project is acceptable. The project is not acceptable. Calculate the NPV of the proposed polyzone project, if the U.S. chemical company can start up polyzone production at 54 million pounds in year 1 rather than year 2. For year 4, assume the spread in year 3 still applies. (Do not round intermediate calculations. Round your answer to 2 decimal places.) What's the right management decision? The project is acceptable. The project is not acceptable. Calculate the NPV of the proposed polyzone project, if the U.S. company makes a technological advance that reduces its annual production costs to $32.0 million. Competitors' production costs do not change. For year 4. assume the spread in year 3 still applies. (Do not round intermediate calculations. Round your answer to 2 decimal places.) What's the right management decision? The project is acceptable. The project is not acceptable.

Explanation / Answer

a-1 Year PVF(13%,n year) cash inflow Present value Total cost Present value

1 0.885 (0* $1.34) $0 34 $30.09

2 0.783 (54* $1.34) $56.66 96 $75.17

3 0.693 (108 *$1.34) $100.29 88 $60.98

4 0.613 (108 *$1.24) $82.09 88 $53.94

5-10 2.452 (108 *$1.09) $288.65 88 $215.78

$527.69 $435.96

NPV = present value of cash inflow - present value of cash outflow

= $527.69 - ($100 + $435.96)

= $527.69-$535.96

= -$8.27

a-2 The project is not acceptable , because the NPV of project is less than zero or negative.

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