Johnson entertainment systems is setting up to manufacture a new line of video game consoles. the cost of the manufacturing equi
pment is $1,750,000. expected cash flows over the next four years are $725,000, $850,000, $1,200,000, and $1,500,000. given the company's required rate of return of 15 percent, what is the npv of this project? (do not round intermediate computations. round final answer to nearest dollar.)
1 answer:
Given:
<span>the cost of the manufacturing equipment is $1,750,000.
expected cash flows over the next four years are $725,000, $850,000, $1,200,000, $1,500,000. company's required rate of return of 15 percent
NPV or Net Present Value formula is attached. We just plug in the values that corresponds to the formula.
NPV = -1,750,000 + (725,000/1.15) + (850,000/1.15</span>²) + (1,200,000/1.15³) + (1,500,000/1.15⁴)
<span>NPV = -1,750,000 + 630,434.78 + 642,722.12 + 789,019.48 + 857,629.87
NPV = -1,750,000 + 2,919,805.95
NPV = 1,169,805.95 or 1,169,806
</span>
<span>the cost of the manufacturing equipment is $1,750,000.
expected cash flows over the next four years are $725,000, $850,000, $1,200,000, $1,500,000. company's required rate of return of 15 percent
NPV or Net Present Value formula is attached. We just plug in the values that corresponds to the formula.
NPV = -1,750,000 + (725,000/1.15) + (850,000/1.15</span>²) + (1,200,000/1.15³) + (1,500,000/1.15⁴)
<span>NPV = -1,750,000 + 630,434.78 + 642,722.12 + 789,019.48 + 857,629.87
NPV = -1,750,000 + 2,919,805.95
NPV = 1,169,805.95 or 1,169,806
</span>
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