Question

Rossdale Flowers has a new greenhouse project with an initial cost of $371,500 that is expected to generate cash flows of $46,500 for 12 years and a cash flow of $61,900 in Year 13. If the required return is 8.6 percent, what is the project's NPV?

?$15,800.21

$119,279.50

?$10,531.16

$5,378.66

$102,001.43

Answer 1

Year	Annual Cash Inflows	Present Value factor at 8.6%	Present Value of Annual Cash inflows
1	46,500	0.920810	42,817.68
2	46,500	0.847891	39,426.96
3	46,500	0.780740	36,304.75
4	46,500	0.718920	33,429.79
5	46,500	0.661989	30,782.50
6	46,500	0.609560	28,344.84
7	46,500	0.561295	26,100.22
8	46,500	0.516846	24,033.35
9	46,500	0.475917	22,130.16
10	46,500	0.438229	20,377.68
11	46,500	0.403526	18,763.98
12	46,500	0.371571	17,278.06
13	61,900	0.342146	21,178.88
Total Present Value of Annual Cash inflows			$ 360,968.84

Project’s Net Present Value [NPV] = Present Value of annual cash inflows – Initial Cost

= $360,968.84 – 371,500

= ?$10,531.16 [Negative NPV]

"Hence, The Answer is ?$10,531.16"