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monitta
3 years ago
12

The following data pertain to an investment in equipment:Invst in proj $10,000Annual Net cash inflw 2,400Working cap. req 5,000s

alvage value of the equip $1,000Life of the proj 8 yearsAt the completion of the project, the working capital will be released for use elsewhere. Compute the net present value of the project, using a discount rate of 10%
Business
1 answer:
Pani-rosa [81]3 years ago
6 0

Answer:

Year Cashflow [email protected]% PV

                $    $

0             (15,000) 1  (15,000)

1-8               2,400       5.3349      12,804

8                    5,000      0.4665       2,333

8                   1,000        0.4665        467

                                          NPV        604

Explanation:

The net present value of the project is comprised of initial outlay  and the annual cash inflow discounted at present value of annuity discount factor of 5.3349. The working capital and salvage value will also be discounted at 10% in year 5. The discount factor for year 5(0.4665) could be derived from present value table. Thus, net present value is the difference between the present values and initial outlay.

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3 years ago
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