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Kyoto Company is in the process of constructing a new plant at a cost of $30...

Kyoto Company is in the process of constructing a new plant at a cost of $30 million. It expects the project to generate cash flows of $13,000,000, $23,000,000, and 29,000,000 over the next three years. The cost of capital is 20 percent. What is the net present value of this project? (Round to the nearest million dollars.)

Select one:

A. $10 million

B. $12 million

C. $14 million

D. $16 million

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Homework Answers

Answer #1

option (c) i.e. $14 million is the correct answer

Net Present Value = Present Value of Cash inflow - Present Value of Cash outflow

Net Present Value = where, CF1, CF2 and CF3 are cash flows for the year 1, 2 and 3 respectively

Ke = cost of capital

Net Present Value =

Net Present Value = ($10.83 + $15.97 + $16.78) -$30

Net present Value = $13.58 million

or NPV = $14 Million (rounded off to nearest million $ )

Incase of any doubt, please comment below. I would be happy to help.

​​​​​​​Please upvote the answer if it was of help to you.

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