Chapter 8 questions & problems: 10, 11 chapter 9 questions &


Chapter 8:

10. NPV and IRR. A project that costs $3,000 to install will provide annual cash flows of $800 for

each of the next 6 years. (LO8-1 and LO8-2)

a. What is NPV if the discount rate is 10%?

b. How high can the discount rate be before you would reject the project?

11. NPV. A proposed nuclear power plant will cost $2.2 billion to build and then will produce cash

flows of $300 million a year for 15 years. After that period (in year 15), it must be decommissioned

at a cost of $900 million. (LO8-1 and LO8-2)

a. What is project NPV if the discount rate is 5%?

b. What if the discount rate is 18%? 

Chapter 9:

1. Cash Flows. Quick Computing currently sells 10 million computer chips each year at a price of

$20 per chip. It is about to introduce a new chip, and it forecasts annual sales of 12 million of

these improved chips at a price of $25 each. However, demand for the old chip will decrease,

and sales of the old chip are expected to fall to 3 million per year. The old chips cost $6 each to

manufacture, and the new ones will cost $8 each. What is the proper cash flow to use to evaluate

the present value of the introduction of the new chip? (LO9-1)

2. Incremental Cash Flows. A corporation donates a valuable painting from its private collection

to an art museum. Which of the following are incremental cash flows associated with the

donation? (LO9-1)

a. The price the firm paid for the painting

b. The current market value of the painting

c. The deduction from income that it declares for its charitable gift

d. The reduction in taxes due to its declared tax deduction

3. Cash Flows. Conference Services Inc. has leased a large office building for $4 million per

year. The building is larger than the company needs; two of the building’s eight stories are

almost empty. A manager wants to expand one of her projects, but this will require using one

of the empty floors. In calculating the net present value of the proposed expansion, senior

management allocates one-eighth of $4 million of building rental costs (i.e., $.5 million)

to the project expansion, reasoning that the project will use one-eighth of the building’s

capacity. (LO9-1)

a. Is this a reasonable procedure for purposes of calculating NPV?

b. Can you suggest a better way to assess a cost of the office space used by the project?

5. Cash Flows. Tubby Toys estimates that its new line of rubber ducks will generate sales of

$7 million, operating costs of $4 million, and a depreciation expense of $1 million. If the tax

rate is 35%, what is the firm’s operating cash flow? (LO9-2)

7. Calculating Net Income. The owner of a bicycle repair shop forecasts revenues of $160,000 a

year. Variable costs will be $50,000, and rental costs for the shop are $30,000 a year. Depreciation

on the repair tools will be $10,000. Prepare an income statement for the shop based on

these estimates. The tax rate is 35%. (LO9-2)

Prime Paper Help
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.