Using net present value when evaluating projects

Assignment Help Financial Management

Reference no: EM13948570

Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost of capital is 5.76 percent. What is the NPV of a project if the initial costs are $2,478,570 and the project life is estimated as 12 years? The project will produce the same after-tax cash inflows of $690,196 per year at the end of the year.

Reference no: EM13948570

Questions Cloud

Normally distributed with an average historical return : Assume that annual returns on small-company stocks are normally distributed with an average historical return of 17.1% and a standard deviation of 32.6%. What is the probability that annual return on small-company stocks is positive?

Used regularly as valuation metric : P/E ratio is used regularly as a valuation metric and you will often hear it discussed in the business news media (i.e. CNBC, Bloomberg, Fox Business, etc). You have just had the opportunity to apply P/E in a relatively easy assignment. Based on this..

Single payoff at the end of year : A project has an initial outlay of $2,043. It has a single payoff at the end of year 3 of $7,083. What is the net present value (NPV) of the project if the company’s cost of capital is 8.30 percent?

Transfers from marketable securities to cash : Barenbaum Industries projects that cash outlays of $4.5 million will occur uniformly throughout the year. Barenbaum plans to meet its cash requirements by periodically selling marketable securities from its portfolio. Use the Baumol model to determin..

Using net present value when evaluating projects : Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost of capital is 5.76 percent. What is the NPV of a project if the initial costs are $2,478,570 and the project life is estimated as 12 years? Th..

What is the equivalent annual cost of an oven : Champion Bakers uses specialized ovens to bake its bread. One oven costs $850,000 and lasts about 3 years before it needs to be replaced. The annual operating cost per oven is $10,000. What is the equivalent annual cost of an oven if the required rat..

What are some potential pros and or cons of this decision : Interworld Distributors has paid quarterly cash dividends since 1980. The dividends have steadily increased from $.25 per share to the latest dividend declared of $2.00 per share. The board of directors is eager to continue this trend despite the fac..

Sells extended warranties for durable consumer goods : Internal rate of return Peace of Mind, Inc. (PMI), sells extended warranties for durable consumer goods such as washing machines and refrigerators. When PMI sells an extended warranty, it receives cash up front from the customer, but later PMI must c..

What is the investments net present value : Your firm is considering an investment that will cost $920,000 today. the investment will produce cash flows of $450,000 in year one, $270,000 in years 2 though 4, and $200,000 in year5. the discount rate that your firm uses for projects of this type..

User Account

All Pages