Question
1. A firm has undertaken a feasibility study to evaluate a project that has the following estimated cashflows: Increased sales to business of $140,000 for
1. A firm has undertaken a feasibility study to evaluate a project that has the following estimated cashflows:
- Increased sales to business of $140,000 for the next 5 years (starting in one year's time)
- Increased costs of $20,000 for the next two years (starting in one year's time)
- The initial capital expenditure required is $100,000.
- The study cost $10,000 to conduct.
-Amount borrowed to fund project is $200,000 with interest of 8% pa paid yearly.
If the firm is facing a discount rate of 10%, what is the NPV of this project?
a. $395,999
b. $516,155
c. $455,420
d. $506155
2. Tank Ltd is considering undertaking the purchase of a new piece of equipment that is expected to increase revenue by $12,000 each year for six years. The equipment will increase costs $4,000 each year for six years. It costs $32,000 to purchase today and for tax purposes must be depreciated down to zero over its 8 year useful life using the straight-line method. If Tank is actually forecasting a salvage (for capital budgeting purposes) of $5,000 after 6 years, what is the machine's net cash flow (after tax) for year 6? Assume the tax rate is 30%.
a. 12,400 | ||
b. 11,800 | ||
c. 13,000 | ||
d. 12,700 3. |
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What is the Net Present Value of a project with a discount rate of 6% p.a.compounded annually, whose net cash flows are forecast to be: (Choose the closest answer)
Year 0: $10,000 outflow Year 1: $5,000 inflow Year 2: $4,000 inflow Year 3: $3,000 inflow Year 4: $2,000 inflow a 2,677.32
b 2,459.95
c 3,207.55
d 2,380.01
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