Should the firm accept this project

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1. Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $5.5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $5.8 million. The company wants to build its new manufacturing plant on this land; the plant will cost $13 million to build, and the site requires $820,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

2.A project that provides annual cash flows of $16,600 for eight years costs $72,000 today

What is the NPV for the project if the required return is 7 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

NPV $

At a required return of 7 percent, should the firm accept this project?

Accept
Reject

What is the NPV for the project if the required return is 19 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV $
At a required return of 19 percent, should the firm accept this project?

Accept
Reject

At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Discount rate %

Reference no: EM131903874

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