1. Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years.
The projected cash flows that result from the contract are given below:
•Cost of equipment $500,000
•Working capital needed $100,000
•Net annual cash inflows $80,000
•Salvage value of equipment in ten years $40,000
•Working capital released $100,000
•The company's required rate of return and discount rate is 12%.
•The working capital would be released at the end of project.
What is the present value of the salvage value of the equipment?
a. $12,880
b. $40,000
c. $100,000
d. $226,008
2. ? Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years.
The projected cash flows that result from the contract are given below:
•Cost of equipment $500,000
•Working capital needed $100,000
•Net annual cash inflows $80,000
•Salvage value of equipment in ten years $40,000
•The company's required rate of return and discount rate is 12%.
The working capital would be released at the end of project. What is the present value of the annual cash inflows?
a. $25,760
b. $80,000
c. $100,000
d. $452,016
3. Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years.
The projected cash flows that result from the contract are given below:
•Cost of equipment $500,000
•Working capital needed $100,000
•Net annual cash inflows $80,000
•Salvage value of equipment in ten years $40,000
•The company's required rate of return and discount rate is 12%.
The working capital would be released at the end of project. What is the present value of the working capital needed?
a. $32,200
b. $(32,200)
c. $100,000
d. $(100,000)
4. Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years. The projected cash flows that result from the contract are given below:
•Cost of equipment $500,000
•Working capital needed $100,000
•Net annual cash inflows $80,000
•Salvage value of equipment in ten years $40,000
•The company's required rate of return and discount rate is 12%.
The working capital would be released at the end of project. What is the present value of the cost of the equipment?
a. $446,450
b. $500,000
c. $(446,450)
d. $(500,000)