Question

A project will continue for 5 years with expected net cash flow of $18,256 per year...

A project will continue for 5 years with expected net cash flow of $18,256 per year over its life. Required rate of return from this project is 12%. The project requires initial investment of $53,448.

Using the above data, calculate the

  • Net Present Value

Homework Answers

Answer #1

Net Present Value Calculation:

Present value foe each year's cash flow = Cash flow for each year/(1+ rate of return)^time

PV(t=1) = 18256/(1+0.12)^1

PV(t=2) = 18256/(1+0.12)^2

PV(t=3) = 18256/(1+0.12)^3

PV(t=4) = 18256/(1+0.12)^4

PV(t=5) = 18256/(1+0.12)^5

Rate of Return 12%
Years 0 1 2 3 4 5
Cashflow -53448 18256 18256 18256 18256 18256
PV -53448 16300 14553.57 12994.26 11602.02 10358.94

So, Net Present Value =

NPV = -initial Investment + Sum of [Present Values of all cash inflows]

NPV = -53448 + 65808.79 = 12360.79

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a capital expenditure project that has forecasted revenues equal to $32,000 per year; cash expenses...
Consider a capital expenditure project that has forecasted revenues equal to $32,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000, and the equipment’s estimated salvage value at the end of the project is $9,000. The equipment’s $23,000 cost will be depreciated on a straight-line basis to $0 over a 10-year estimated economic life. Assume that the project requires an initial $7,000 working capital investment. The company’s marginal tax rate...
A project will produce an operating cash flow of $358,000 a year for four years. The...
A project will produce an operating cash flow of $358,000 a year for four years. The initial cash outlay for equipment will be $785,000. The net aftertax salvage value of $42,000 will be received at the end of the project. The project requires $78,000 of net working capital that will be fully recovered when the project ends. What is the net present value of the project if the required rate of return is 14 percent? $237,613 $251,159 $274,300 $290,184 $309,756...
A project will produce an operating cash flow of $283,000 a year for four years. The...
A project will produce an operating cash flow of $283,000 a year for four years. The initial cash outlay for equipment will be $631,000. An aftertax salvage value of $42,000 for the equipment will be received at the end of the project. The project requires $56,000 of net working capital that will be fully recovered. What is the net present value of the project if the required rate of return is 16 percent? $166,218.32 $159,009.65 $151,870.15 $143,218.96 $137,642.18
A project will produce an operating cash flow of $385,000 a year for three years. The...
A project will produce an operating cash flow of $385,000 a year for three years. The initial cash outlay for equipment will be $850,000. The net aftertax salvage value of $50,000 will be received at the end of the project. The project requires $72,000 of net working capital up front that will be fully recovered. What is the net present value of the project if the required rate of return is 14 percent? $45,915.26 $51,208.72 $59,612.87 $54,174.86 $47,320.15
A project will produce an operating cash flow of $475,000 a year for four years. The...
A project will produce an operating cash flow of $475,000 a year for four years. The initial cash outlay for equipment will be $1,080,000. The net aftertax salvage value of $81,000 will be received at the end of the project. The project requires $142,000 of net working capital up front that will be fully recovered. What is the net present value of the project if the required rate of return is 14 percent? $294,047.25 $308,116.57 $281,547.93 $317,286.90 $272,430.06
A project will produce an operating cash flow of $10,000 a year for three years. The...
A project will produce an operating cash flow of $10,000 a year for three years. The initial cash investment in the project will be $20,600. An additional $2,5000 of net working capital will be required throughout the life of the project. What is the internal rate of return for the project? Group of answer choices 21.44% 18.43% 14.30% 30.24% 4.54%
An investment of $45,000 is expected to produce cash flow of $5,000 per year over a...
An investment of $45,000 is expected to produce cash flow of $5,000 per year over a two year holding period. The terminal value is expected to be $55,000. If the required yield is 10%, calculate the Net Present Value and show where it comes from using the "return on" and "return of" grid. (Please solve using financial calculator and show calculator inputs).
You are considering the following project. What is the expected cash flow for the last year...
You are considering the following project. What is the expected cash flow for the last year (year 3)? This cash flow includes operating cash flow and terminal cash flow. Project life: 3 years Equipment: Cost: $20,000 Economic life: 3 years Salvage value: $4,000 Initial investment in net working capital: $2,000 Revenue: $13,000 in year 1, with a nominal growth rate of 6% per year Fixed cost: $3,000 in year 1 Variable cost: 30% of revenue Corporate tax rate (T): 40%...
Question. Marie's Fashions is considering a project that will require $28,000 in net working capital and...
Question. Marie's Fashions is considering a project that will require $28,000 in net working capital and initial investment of$87,000 in fixed assets. The ~project is expected to produce annual sales of $75,000 with associated costs of $57,000. The project has a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 30 percent. The required rate of return for the project is 12%. What is the operating cash...
Q1/A project has an initial cost of $99,865, and promises to pay a fixed cash flow...
Q1/A project has an initial cost of $99,865, and promises to pay a fixed cash flow per year for 3 years. It has been determined that using a discount rate of 12.1 percent, its net present value is $100,196. What must be the expected annual cash flow? Q2/The Xdiagnose Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” As a result, the cemetery project will provide a net cash...