Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $10,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,500,000 per year for each of the next 8 years. In year 8 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 8 the investment cash inflow totals $3,500,000. Calculate the project's NPV using a discount rate of 9 percent.

Question

05-07-2024
Business

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Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $10,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $2,500,000 per year for each of the next 8 years. In year 8 the firm will also get back a cash flow equal to the salvage value of the equipment, which is valued at $1 million. Thus, in year 8 the investment cash inflow totals $3,500,000. Calculate the project's NPV using a discount rate of 9 percent.

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