Question

Correl Corporation has provided the following data concerning an investment project that it is considering: Initial investment $190,000 Annual cash flow $75,000 per year Salvage value at the end of the project $25,000 Life of project 4 years Company discount rate 15% The net present value of the project is closest to: (use Present Value Tables below to solve this problem) A. $38,500 B. $228,500 C. $135,000 D. $24,200

Answer 1

Answer:

 A. $38,500 

Explanation:

The net present value is the present value of after tax cash flows from an investment less the amount invested.

Npv can be calculated using a financial calculator.

Cash flow in year 0 = $-190,000

Cash flow each year from 1 to 3 = $75,000

Cash flow in year 4 = $75,000 + $25,000 = $100,000

I = 15%

NPV = $38,417.21

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you