Question 3 The XYZ Company has the opportunity to invest in a new venture, which would have a working lifetime of 5 years. The new venture would generate the following increases in XYZ net cash flows. In the first year of the new venture, the new plant would increase revenue by $50,000. For the following 4 years the revenue would increase at a rate of 10 per cent per annum. The cost of the equipment is $200,000 and XYZ cost of capital is 9 per cent. Calculate the NPV of the project. Should XYZ take on the venture? Round off to three decimal digits.
Question 3 The XYZ Company has the opportunity to invest in a new venture, which would have a working lifetime of 5 years. The new venture would generate the following increases in XYZ net cash flows. In the first year of the new venture, the new plant would increase revenue by $50,000. For the following 4 years the revenue would increase at a rate of 10 per cent per annum. The cost of the equipment is $200,000 and XYZ cost of capital is 9 per cent. Calculate the NPV of the project. Should XYZ take on the venture? Round off to three decimal digits.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Question 3
The XYZ Company has the opportunity to invest in a new venture, which would have a working lifetime
of 5 years. The new venture would generate the following increases in XYZ net cash flows.
2
In the first year of the new venture, the new plant would increase revenue by $50,000. For the following 4
years the revenue would increase at a rate of 10 per cent per annum. The cost of the equipment is $200,000
and XYZ cost of capital is 9 per cent.
Calculate the NPV of the project. Should XYZ take on the venture? Round off to three decimal digits.
10:34 AM
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10
ENG
6/6/2021
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