(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $4,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.1 million. Thus, in year 6 the investment cash inflow totals $5,100,000. Calculate the project's NPV using a discount rate of 7 percent. If the discount rate is 7 percent, then the project's NPV is $ (Round to the nearest dollar.)

(Net present value calculation) Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $4,000,000 per year for each of the next 6 years. In year 6 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1.1 million. Thus, in year 6 the investment cash inflow totals $5,100,000. Calculate the project's NPV using a discount rate of 7 percent. If the discount rate is 7 percent, then the project's NPV is $ (Round to the nearest dollar.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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