Question

TB Problem Qu. 13-161 Mattice Corporation is considering...

Mattice Corporation is considering investing $850,000 in a project. The life of the project would be 6 years. The project would require additional working capital of $35,000, which would be released for use elsewhere at the end of the project. The annual net cash inflows would be $180,000. The salvage value of the assets used in the project would be $45,000. The company uses a discount rate of 13%. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using the tables provided.

Required:

Compute the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Answer 1

Cash Flow	Select Chart	Amount	PV Factor	Present Value
Annual Cash Flow	1-6	$       1,80,000.00	x 3.9975	$ 7,19,550
Residual value	6	$          45,000.00	x 0.4803	$ 21,614
Working capital	6	$          35,000.00	x 0.4803	$ 16,811
	Present value of Cash Inflows			$ 7,41,164
	Less:: Initial Investment			$ 8,50,000
	Less: Working Capital			$ 35,000
	Net Present Value			$ -1,43,837

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