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Darya [45]
2 years ago
12

​Sandstone, Inc. is considering a fourminusyear project that has an initial afterminustax outlay or afterminustax cost of​ $80,0

00. The future cash inflows from its project are​ $40,000, $40,000,​ $30,000 and​ $30,000 for years​ 1, 2, 3 and​ 4, respectively. Sandstone uses the net present value method and has a discount rate of​ 12%. Will Sandstone accept the​ project?
Business
1 answer:
mote1985 [20]2 years ago
4 0

Answer:

NPV = $28020.99

so he accept the this project as NPV value is positive

Explanation:

given data

CF 0 = $80000

CF 1 = $40000

CF 2 = $40000

CF 3 = $30000

CF 4 = $30000

discount rate r = 12%

solution

we get here Net present value (NPV) of the project that is total sum of the current value of all flow that is express as

NPV = - CF 0 + \frac{CF1}{(1 + r)} + \frac{CF 2}{(1 + r)^2} + \frac{CF3}{( 1+ r)^3} + \frac{CF4}{(1+r)^4}     ...........................1

put here value and we get

NPV  = - 80000 + \frac{40000}{(1+ 0.12)} + \frac{40000}{(1+ 0.12)^2} + \frac{30000}{( 1 + 0.12)^3} + \frac{30000}{(1+ 0.12)^4}  

solve it we get

NPV =  - 80000 + 35714.29 + 31887.76 + 21353.41 + 19065.54

NPV = $28020.99

so he accept the this project as NPV value is positive

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