Question
Please see attached for help. Consider the following projects: Cash Flows, $ Project C 0 C 1 C 2 C 3 C 4 C 5
Please see attached for help.
- Consider the following projects:
| Cash Flows, $ | |||||
Project | C0 | C1 | C2 | C3 | C4 | C5 |
A | -1,300 | +1,300 | 0 | 0 | 0 | 0 |
B | 2,600 | +1,300 | +1,300 | +4,300 | +1,300 | +1,300 |
C | 3,250 | +1,300 | +1,300 | 0 | +1,300 | +1,300 |
Marsha had been renting a transporter every other week for $212 per day plus $1.60 per mile. Most of the trips are 90 miles in total. Marsha usually gives the driver a $50 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.57 per mile. Insurance costs for Marshas transporter are $1,800 per year.
The transporter will probably be worth $27,000 (in real terms) after eight years, when Marshas horse Nike will be ready to retire. Assume a nominal discount rate of 9% and a 3% forecasted inflation rate. Marshas transporter is a personal outlay, not a business or financial investment, so taxes can be ignored.
Hint: All numbers given in the question are in real term.
Calculate the NPV of the investment. (Do not round intermediate calculations. Round your answer to 2 decimal places.)1.)Consider the following projects:
| Cash Flows, $ | |||||
Project | C0 | C1 | C2 | C3 | C4 | C5 |
A | -1,300 | +1,300 | 0 | 0 | 0 | 0 |
B | 2,600 | +1,300 | +1,300 | +4,300 | +1,300 | +1,300 |
C | 3,250 | +1,300 | +1,300 | 0 | +1,300 | +1,300 |
a.If the opportunity cost of capital is 9%, what is the NPV foreach project? (Negativeamounts should be indicated by a minus sign. Do not round intermediatecalculations. Round your answers to 2 decimal places.)
b.Calculate the payback period for each project. (Do not round intermediatecalculations. Round your answer to 2 decimal places.)
c.Calculate the discounted payback period for each project. (Enter 0 if the paybackperiod cannot be calculated. Do not round intermediate calculations. Round youranswers to 2 decimal places.)
2.)Marsha Jones has bought a used Mercedes horse transporter forher Connecticut estate. It cost $47,000. The object is to save on horsetransporter rentals.
Marsha had beenrenting a transporter every other week for $212 per day plus $1.60 per mile.Most of the trips are 90 miles in total. Marsha usually gives the driver a $50tip. With the new transporter she will only have to pay for diesel fuel andmaintenance, at about $0.57 per mile. Insurance costs for Marshas transporterare $1,800 per year.
The transporter willprobably be worth $27,000 (in real terms) after eight years, when Marshashorse Nike will be ready to retire. Assume a nominal discount rate of 9% and a3% forecasted inflation rate. Marshas transporter is a personal outlay, not abusiness or financial investment, so taxes can be ignored.
Hint: All numbers given in the question are in real term.
Calculate the NPV of the investment. (Do not roundintermediate calculations. Round your answer to 2 decimal places.)
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