1) Briarcrest condiments is a spice-making form. Recently, it developed a new pr

Question

1) Briarcrest condiments is a spice-making form. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,130,060. have a life of five years, and would produce the cash flows shown in the following table:

Year Cash Flow

1 589,422

2 -217,864

3 721,128

4 1,001,145

5 660,334

What is the NPV if the discount rate is 12.36 percent? (Round to 2 decimal points)

2) Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investment will consist of $2.50 million for land and $9.50 million for trucks and other equipment. The land,m all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.24 million, $2.35 mil;lion, $2.35 million above book value. The firm is expected to produce revenue of $2.05 million each year, and annual cash flow from operations equals $1.91 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 9 percent. Calculate the NPV of this investment.

NPV =

This project should be (accepted/rejected)?

3) Bell Mountain Vineyards is considering updating it's current manual account system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The bell Mountain's opportunity cost of capital is 14.2 percent, and the costs and values of investments made at different times in the future are as follows:

Year Cost Value of Future Savings

0 5,000 7,000

1 4,700 7,000

2 4,400 7,000

3 4,100 7,000

4 3,800 7,000

5 3,500 7,000

Calculate the NPV of each choice..

The NPV of each choice is:

NPV0 =

NPV1 =

NPV2 =

NPV3 =

NPV4 =

NPV5 =

Suggest when should Bell Mountain buy the new account system? (year 1, 2, 3, 4, 5)?

4) Chip

Explanation / Answer

1st Answer:

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