Question

Calculate the NPV of a project that has an outlay of $200,000 and has annual net...

Calculate the NPV of a project that has an outlay of $200,000 and has annual net cash flows of $50000 per year over 6 years. The project has a salvage value (disposal value) of 10% of its original value. The required rate of return for projects of similar risk is 0.1.

Note that the rate of return is quoted as a decimal, e.g. 12% p.a. is written as .12 in the question above. Your answer must be accurate to the nearest dollar. Do not enter the $ sign when entering your answer. If your NPV is negative enter a minus sign before typing your answer, e.g. -2345.

Homework Answers

Answer #1

Net Present Value (NPV) for the Project

Period

Annual Cash Flow ($)

Present Value factor at 10%

Present Value of Cash Flow ($)

1

50,000

0.90909

45,455

2

50,000

0.82645

41,322

3

50,000

0.75131

37,566

4

50,000

0.68301

34,151

5

50,000

0.62092

31,046

6

50,000

0.56447

28,224

6

20,000

0.56447

11,289

TOTAL

2,29,053

Net Present Value (NPV) = Present Value of annual cash inflows – Initial Investment

= $2,29,053 - $200,000

= $29,053

“Therefore, the Net Present Value (NPV) for the Project would be $29,053”

NOTE

The Formula for calculating the Present Value Factor is [1/(1 + r)n], Where “r” is the Discount/Interest Rate and “n” is the number of years.

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
A project has an initial outlay of $2,378. The project will generate annual cash flows of...
A project has an initial outlay of $2,378. The project will generate annual cash flows of $485 over the 5-year life of the project and terminal cash flows of $277 in the last year of the project. If the required rate of return on the project is 20%, what is the net present value (NPV) of the project? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.
1. A project has an initial outlay of $1,732. The project will generate annual cash flows...
1. A project has an initial outlay of $1,732. The project will generate annual cash flows of $783 over the 4-year life of the project and terminal cash flows of $258 in the last year of the project. If the required rate of return on the project is 4%, what is the net present value (NPV) of the project? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. 2.A...
10. Calculate the NPV of a project with initial capital outlay of ₡80,000 that will provide...
10. Calculate the NPV of a project with initial capital outlay of ₡80,000 that will provide ₡25,000 annual cash inflows indefinitely. The required rate of return is 20%.
A firm evaluates all of its projects by applying the NPV decision rule. A project under...
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow 0 –$ 27,400 1 11,400 2 14,400 3 10,400 What is the NPV for the project if the required return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ At a required return of 12 percent, should the firm accept this project? No Yes...
Suppose a company has proposed a new 4-year project. The project has an initial outlay of...
Suppose a company has proposed a new 4-year project. The project has an initial outlay of $21,000 and has expected cash flows of $6,000 in year 1, $9,000 in year 2, $11,000 in year 3, and $13,000 in year 4. The required rate of return is 15% for projects at this company. What is the profitability index for this project? (Answer to the nearest hundredth, e.g. 1.23)
Suppose a company has proposed a new 5-year project. The project has an initial outlay of...
Suppose a company has proposed a new 5-year project. The project has an initial outlay of $23,000 and has expected cash flows of $3,000 in year 1, $5,000 in year 2, $6,000 in year 3, $7,000 in year 4, and $8,000 in year 5. The required rate of return is 15% for projects at this company. What is the Payback for this project? (Answer to the nearest tenth of a year, e.g. 3.2)
Suppose a company has proposed a new 5-year project. The project has an initial outlay of...
Suppose a company has proposed a new 5-year project. The project has an initial outlay of $205,000 and has expected cash flows of $39,000 in year 1, $44,000 in year 2, $50,000 in year 3, $63,000 in year 4, and $78,000 in year 5. The required rate of return is 13% for projects at this company. What is the profitability index for this project? (Answer to the nearest hundredth, e.g. 1.23)
Suppose a company has proposed a new 5-year project. The project has an initial outlay of...
Suppose a company has proposed a new 5-year project. The project has an initial outlay of $231,000 and has expected cash flows of $32,000 in year 1, $50,000 in year 2, $52,000 in year 3, $65,000 in year 4, and $72,000 in year 5. The required rate of return is 11% for projects at this company. What is the profitability index for this project? (Answer to the nearest hundredth, e.g. 1.23)
Suppose a company has proposed a new 5-year project. The project has an initial outlay of...
Suppose a company has proposed a new 5-year project. The project has an initial outlay of $212,000 and has expected cash flows of $40,000 in year 1, $41,000 in year 2, $53,000 in year 3, $61,000 in year 4, and $74,000 in year 5. The required rate of return is 16% for projects at this company. What is the profitability index for this project? (Answer to the nearest hundredth, e.g. 1.23)
Suppose a company has proposed a new 5-year project. The project has an initial outlay of...
Suppose a company has proposed a new 5-year project. The project has an initial outlay of $178,000 and has expected cash flows of $32,000 in year 1, $40,000 in year 2, $57,000 in year 3, $68,000 in year 4, and $74,000 in year 5. The required rate of return is 14% for projects at this company. What is the profitability index for this project? (Answer to the nearest hundredth, e.g. 1.23)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT