What is the project optimal life

Assignment Help Financial Management

Reference no: EM131934288

You are also considering another project which has a physical life of 3 years; that is, the machinery will be totally worn out after 3 years. However, if the project were terminated prior to the end of 3 years, the machinery would have a positive salvage value. Here are the project’s estimated cash flows:

Initial Investment End-of-Year

And Operating Net Salvage

Year Cash Flows Value

0 ($8,000) $8,000

1 3,900 5,100

2 3,000 2,500

3 2,550 0

Using the 8% cost of capital, what is the project’s NPV if it is operated for the full 3 years?

Would the NPV change if the company planned to terminate the project at the end of Year 2? At the end of Year 1?

What is the project’s optimal (economic) life?

Reference no: EM131934288

Questions Cloud

Engage in dialogue during the mediation : If your boss (or her attorney) does decide to engage in dialogue during the mediation, what are the risks concerning information that might be disclosed?

What alternative views does mr davis discuss : What alternative views does Mr. Davis discuss? What do these viewpoints say in contrast to the initial study he examined in his article?

What is a share of dull stock worth : If the required rate of return on Dull's common stock is 15%, what is a share of Dull's stock worth?

Develop measurement systems : Explain how lead and lag indicators are used in a quality program to develop measurement systems.

What is the project optimal life : What is the project’s optimal (economic) life?

How will motivate employees to maintain productivity levels : Review the case study below, and answer the questions that are provided. Provide complete and detailed responses to each question.

Infectious materials under osha guidelines : What are considered potentially infectious materials under OSHA guidelines?

What factors are involved in transition of forest ecosystem : What factors are involved in the transition of a forest ecosystem into a grassland? Consider the anthropogenic place in such transitions.

Determine the annual percentage interest cost : Determine the annual percentage interest cost for each of the following terms of sales,

User Account

All Pages