Lawson Company is considering production of an electronic tablet with the following associated data:
1. Estimate the annual cash flows for the tablet project by completing the following table. Enter amounts that represent cash outflows as negative numbers.
|Recovery of working capital|
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 = $
calculation of npv (figures in $)
|particulars||amount of cash flows||discounting factor @ 12%||discounted value of cash flows|
|total cash outflow||1,842,000||1||-1,842,000|
|less operating expenses||940,000|
|net cash inflow||603,000||3.605 ( annuity value of 5 years )||2,173,815|
|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
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