Question

Juliar Inc. has provided the following data concerning a proposed investment project: (Ignore income taxes.) Initial investment $ 310,000 Life of the project 11 years Annual net cash inflows $ 48,000 Salvage value $ 38,000 The company uses a discount rate of 9%.

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

Required: Compute the net present value of the project. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Net present value $ =?

Answer 1

Present Value of annual net cash inflows					$       48,000	x	6.805	=	$ 3,26,640
Present Value of salvage Value					$       38,000	x	0.388	=	$     14,744
Present Value of All cash inflows									$ 3,41,384
Less:Initial cost of project									$ 3,10,000
Net Present Value									$     31,384
Working:
a.	Present Value of annuity of 1			=	(1-(1+i)^-n)/i			Where,
				=	(1-(1+0.09)^-11)/0.09			i	9%
				=	6.805			n	11
b.	Present Value of 1			=	(1+i)^-n
				=	(1+0.09)^-11
				=	0.388