Question

A firm is considering a project that costs $165,000 to start and generates $28,000/year in after-tax...

A firm is considering a project that costs $165,000 to start and generates $28,000/year in after-tax cash for the next 8 years. After 8 years there are no additional cash flows or salvage value. The firm uses a 15% cost of capital.

Build a spreadsheet model to estimate the net present value of the project.

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Answer #1

The Net Present Value of the project is calculated in the spreadsheet by discounting each cash flow by the cost of capital and summing them. See the second screenshot, which shows formulas to know how to build a model.

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