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Homework answers / question archive / OTR Trucking Company runs a fleet of long-haul trucks and has recently expanded into the Midwest, where it has decided to build a maintenance facility

OTR Trucking Company runs a fleet of long-haul trucks and has recently expanded into the Midwest, where it has decided to build a maintenance facility

Finance

OTR Trucking Company runs a fleet of long-haul trucks and has recently expanded into the Midwest, where it has decided to build a maintenance facility. This project will require an initial cash outlay of $21 million and will generate annual cash inflows of $4.2 million per year for Years 1 through 3. In Year 4, the project will provide a net negative cash flow of $4.8 million due to anticipated expansion of and repairs to facility. During Years 5 through 10, the project will povide cash Inflows of $2.2 million per year. 
a) Calculate the project, NPV and IRR where the disoount rate is 11.6 percent. Is the project a worthwhile investment based on these two measures, Why or why not.

 b) Calculate the projects MIRR. Is the project a worthwhile investment based on this measure, Why or why not.

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