Net present value:

10.1    Riggs Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $325,000 over the next three years. If the discount rate is 17.5 percent, what is the NPV on this project?

LO 2

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10.2   Kingston, Inc. management is considering purchasing a new machine at a cost of $4,133,250. They expect this equipment to produce cash flows of $814,322, $863,275, $937,250, $1,017,112, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?

LO 2

10.3   Crescent Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses an 18 percent discount rate, should management go ahead with the project?

Year Cash Flow
0 −$3,300,000
1 $875,123
2 $966,222
3 $1,145,000
4 $1,250,399
5 $1,504,445

LO 2

 

10.4    Franklin Mints, a confectioner, is considering purchasing a new jellybean-making machine at a cost of $312,500. The company’s management projects that the cash flows from this investment will be $121,450 for the next seven years. If the appropriate discount rate is 14 percent, what is the NPV for the project?

LO

10.5    Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table.  If th

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