The Johnson Drum Company is planning to build a new factory. The purchase of the land, building the plant, and installation of equipment will take place over a 2-year period. The following are planned cash outflows: $$\begin{array} { l l }
\text { Year } & \text { Cash Outflow } \
0 & \$ 3,500,000 \
1 & \$ 4,750,000 \
2 & \$ 6,100,000
\end{array}$$ Johnson Drum's cost of capital is 14%, and its marginal tax rate is 35%. What is the NINV measured in present value terms today?

Question

The Johnson Drum Company is planning to build a new factory. The purchase of the land, building the plant, and installation of equipment will take place over a 2-year period. The following are planned cash outflows: $$\begin{array} { l l } 
\text { Year } & \text { Cash Outflow } \
0 & \$ 3,500,000 \
1 & \$ 4,750,000 \
2 & \$ 6,100,000
\end{array}$$ Johnson Drum's cost of capital is 14%, and its marginal tax rate is 35%. What is the NINV measured in present value terms today?

Quizplus · Accepted Answer

The Answer of The Johnson Drum Company is planning to build a new factory. The purchase of the land, building the plant, and installation of equipment will take place over a 2-year period. The following are planned cash outflows: $$\begin{array} { l l } 
\text { Year } & \text { Cash Outflow } \
0 & \$ 3,500,000 \
1 & \$ 4,750,000 \
2 & \$ 6,100,000
\end{array}$$ Johnson Drum's cost of capital is 14%, and its marginal tax rate is 35%. What is the NINV measured in present value terms today?

The Johnson Drum Company Is Planning to Build a New Year Cash Outflow 0$3,500,0001$4,750,0002$6,100,000\begin{array} { l l } \text { Year } & \text { Cash Outflow } \\0 & \$ 3,500,000 \\1 & \$ 4,750,000 \\2 & \$ 6,100,000\end{array} Year 012​ Cash Outflow $3,500,000$4,750,000$6,100,000​

The Johnson Drum Company Is Planning to Build a New $\begin{array} { l l } \text { Year } & \text { Cash Outflow } \\0 & \$ 3,500,000 \\1 & \$ 4,750,000 \\2 & \$ 6,100,000\end{array}$