Answer to Question #260452 in Finance for mahika

Question

Go to the Excel spreadsheet versions of Table 6.2 to answer the following questions. (Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest whole number.)

a. New engineering estimates raise the possibility that capital investment will be more than $12 million, perhaps as much as $15 million. On the other hand, you believe that the 20% cost of capital is unrealistically high and that the true cost of capital is about 11%. Assume straight line depreciation. Calculate the NPV under these alternative assumptions.

b. Continue with the assumed $15 million capital investment and the 11% cost of capital. What if sales, cost of goods sold, and net working capital are each 10% higher in every year? Assume straight line depreciation. Calculate the NPV based on these assumptions.

Answer 1

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