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Determine the net present value for a project that costs $104,000 and would yield after-tax cash...

Determine the net present value for a project that costs $104,000 and would yield after-tax cash flows of $16,000 the first year, $18,000 the second year, $21,000 the third year, $23,000 the fourth year, $27,000 the fifth year, and $33,000 the sixth year. Your firm's cost of capital is 12.00%.   ***without use of financial calculator***

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Answer #1

Initial Investment = $104,000

PV of Inflows

Year Inflows Discounting factor @ 12% PV of Inflows
1 16,000.00 0.8929 14,285.71
2 18,000.00 0.7972 14,349.49
3 21,000.00 0.7118 14,947.39
4 23,000.00 0.6355 14,616.92
5 27,000.00 0.5674 15,320.53
6 33,000.00 0.5066 16,718.83
PV of Inflows 90,238.86

NPV = PV of Inflows - Initial Investment = 90238.86 -104000 = ($13,761.14)

NPV is negative. Project should not be undertaken.

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