Question

You are evaluating a prospective project. The cost of the project is $135,000 at year 0,...

You are evaluating a prospective project. The cost of the project is $135,000 at year 0, the project will generate a cash inflow of $5,000 for the first 3 years and a cash inflow of $21,000 dollars for 7 years afterwards. The appropriate discount rate is 12.94%. Ignoring the PV of the tax shield generated by this project, the NPV of this project is (round to 2 decimals)

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Answer #1

Answer :

Calculation of Net Present Value

Net Present Value = Present Value of Cash Inflow - Present Value of Cash Outflow

Present Value of Cash Outflow = 135,000

Below is the table showing Calculation of Present value of cash Inflow

Year Cash Flows PVF @12.94% Present Value of cash Flows
1 5000 0.88542589 4427.129449
2 5000 0.783979006 3919.895032
3 5000 0.694155309 3470.776547
4 21000 0.614623083 12907.08473
5 21000 0.54420319 11428.26698
6 21000 0.481851594 10118.88346
7 21000 0.426643876 8959.521396
8 21000 0.377761534 7932.992205
9 21000 0.334479842 7024.076682
10 21000 0.296157112 6219.299347
Present value of Cash Flows 76,407.92584

Net Present Value = 76,407.92584 - 135,000

= (-58,592.07416)

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