"> (Answered) ation in 1 year. The company believes the cost a 40% change CFs will be \$5 million for 4 years. cf pv factor @ 12% PV total * 60% â€”1800000 1... - Tutorials Prime

## (Answered) ation in 1 year. The company believes the cost a 40% change CFs will be \$5 million for 4 years. cf pv factor @ 12% PV total * 60% â€”1800000 1...

ation in 1 year. The company believes the cost

a 40% change CFs will be \$5 million for 4 years.

cf pv factor @ 12% PV total * 60%

â€”1800000 1...

This question was created from FINC 5880 WK 5 MidTerm /file/20952030/FINC-5880-WK-5-MidTerm/?focusQaId=10717348

I did not get the same answer for this question - first of all the cost of equipment is 18M - not 1.8 as used in this text. Also, I got a negative NPV for the low 40% case (should that not be considered?) Can you confirm that I thought this out correctly? Thanks!

HIGH 60%

YR Cash Flow PV

0 \$0.00 \$0.00 *wait one yr

1 -\$18,000,000.00 -\$18,000,000.00

2 \$9,000,000.00 \$8,035,714.29

3 \$9,000,000.00 \$7,174,744.90

4 \$9,000,000.00 \$6,406,022.23

5 \$9,000,000.00 \$5,719,662.71

6

\$9,336,144.12

LOW 40%

YR Cash Flow PV

0 \$0.00 \$0.00 *wait one yr

1 -\$18,000,000.00 -\$18,000,000.00

2 \$5,000,000.00 \$4,464,285.71

3 \$5,000,000.00 \$3,985,969.39

4 \$5,000,000.00 \$3,558,901.24

5 \$5,000,000.00 \$3,177,590.39

6

-\$2,813,253.27 Since this NPV is negative it would not be considered

EXPECTED

High 60.00% \$5,601,686.47

Low - not considered 40.00% \$0.00

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This question was answered on: Jan 02, 2020

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