Question

Rossdale Flowers has a new greenhouse project with an initial cost of $362,000 that is expected...

Rossdale Flowers has a new greenhouse project with an initial cost of $362,000 that is expected to generate cash flows of $47,500 for 11 years and a cash flow of $62,900 in Year 12. If the required return is 8.9 percent, what is the project's NPV?

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Answer #1
Discount rate 0.089
Year 0 1 2 3 4 5 6 7 8 9 10 11 12
Cash flow stream -362000 47500 47500 47500 47500 47500 47500 47500 47500 47500 47500 47500 62900
Discounting factor 1 1.089 1.185921 1.291468 1.406409 1.531579 1.66789 1.816332 1.977985 2.154026 2.345734 2.554505 2.781855
Discounted cash flows project -362000 43618 40053.26 36779.85 33773.97 31013.74 28479.1 26151.61 24014.34 22051.73 20249.52 18594.6 22610.81
NPV = Sum of discounted cash flows
NPV Project = -14609.5
Where
Discounting factor = (1 + discount rate)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
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