I need help with these questions, also please show work on how you got the answe
ID: 2639015 • Letter: I
Question
I need help with these questions, also please show work on how you got the answers pleasea and thank you :)
1. A factory costs $520,000.It will produce and inflow after operating costs of $160,000 in year 1, $260,000 in year 2, and $360,000 in year 3.The opportunity cost of capital is 14%.Calculate the NPV.
2. A factory cost $980,000.You reckon that it will produce an inflow after operating costs of $188,000 a year for 10 years.
a.If the opportunity cost of capital is 12% what is the net present value of the factory.
b.What will the factory be worth at the end of six years?
3. At an interest rate of 12%, the five-year discount factor is 0.567.How many dollars is $1.55 worth in five years if invested at 12%?
4.Halcyon Lines is considering the purchase of a new bulk carrier for $9.5 million.The forecasted revenues are $6.5 million a year and operating costs are $5.5 million.A Major refit costing $3.5 million will be required after both the fifth and tenth years.After 15 years, the ship is expected to be sold for scrap at $3.0 million.If the discount rate is 12%, what is the ships Net Present Value?
5. If the Present Value of $289 is $240, what is the discount factor?
6. If you invest $145 at an interest rate of 10%, how much will you have at the end of seven years?
7. A project produces a cash flow of $507 in year 1, $212 in year 2, and $872 in year 3.If the cost of capital is 13.5% what is the projects Present Value?
Explanation / Answer
1>NPV=-520000+160000/(1.14^1)+260000/(1.14^2)+360000/(1.14^3) 63402.18 2>a>NPV=980000-PV of Annuity(A=188000,N=10,I=12%)=980000-5.6502*188000 -82237.6 b> NPV=980000-PV of Annuity(A=188000,N=6,I=12%)=980000-4.1114*188000 207056.8 3>A*0.567=1.55 or A=1.55/0.567= 2.73 4>Particulars/Year Year Amount PV@12% Initial Investment 0 -9.5 -9.5 Revenue=6.5-5.5 1 1 0.89 3 1 0.71 4 1 0.64 Subtract = 3.5 = (1-3.5) 5 -2.5 -1.42 6 1 0.51 7 1 0.45 8 1 0.40 9 1 0.36 Subtract = 3.5 = (1-3.5) 10 -2.5 -0.80 11 1 0.29 12 1 0.26 13 1 0.23 14 1 0.20 Add=3 = (1+3) 15 4 0.73 NPV -6.05 5> Discount Factor=289/240= 1.204 6> FV=145*(1.10^7) 282.56 7> NPV=507/(1.135^1)+212/(1.135^2)+872/(1.135^3) 1207.65