Question

Lawson Company is considering production of an electronic tablet with the following associated data:

• Expected annual revenues, $1,500,000
• A projected product life cycle of five years
• Equipment, $1,600,000 with a salvage value of $200,000 after five years
• Expected increase in working capital, $200,000 (recoverable at the end of five years)
• Annual cash operating expenses are estimated at $900,000.
• The required rate of return is 12 percent.

1. Estimate the annual cash flows for the tablet project by completing the following table. Enter amounts that represent cash outflows as negative numbers.

Year	Item	Cash Flow
0	Equipment	$
	Working capital
	Total	$
1–4	Revenues	$
	Operating expenses
	Total	$
5	Revenues	$
	Operating expenses
	Salvage
	Recovery of working capital
	Total	$

2. Using the estimated cash flows, calculate the NPV (round the discount factor to three decimal places and the present values to the nearest dollar):

NPV = $

Answer 1

calculation of npv (figures in $)

particulars	amount of cash flows	discounting factor @ 12%	discounted value of cash flows
equipment	1,647,000
working capital	195,000
total cash outflow	1,842,000	1	-1,842,000
total revenues	1,543,000
less operating expenses	940,000
net cash inflow	603,000	3.605 ( annuity value of 5 years )	2,173,815
salvage value	189,000
recovery of working capital	195,000
total	384,000	0.567(discount factor if 5 year)	217,728

NPV = $ 549,543

so this project is acceptable

Any doubt comment below i will explain or resolve until you got....
PLEASE.....UPVOTE....ITS REALLY HELPS ME....THANK YOU....SOOO MUCH....
Please comment if any querry i will resolve as soon as possible