A change in interest rates is one way to make that correspondence happen. A fall in interest rates increases the amount of money people wish to hold, while a rise in interest rates decreases that amount. A change in prices is another way to make the money supply equal the amount demanded.
Answer:
Determine the net cash flows for the first year of the project:
- $90,816 - $167,600 = -$76,784
Determine the net cash flows for years 2 - 9 of the project:
Determine the net cash flows for year 10 of the project:
- $90,816 + $12,800 = $130,616
Explanation:
additional sales 8,600 units at $46 each = $395,600
required investment $167,600
10 year useful life and $12,800 residual value
selling expenses 4% of total revenue
manufacturing costs per unit:
- Direct labor $8
- Direct materials $22
- Fixed factory depreciation $8.40
- Variable factory overhead $3.60
- Total $42.00
net cash flows:
total revenue $395,600
direct materials -$189,200
direct labor -$68,800
variable overhead -$30,960
selling expenses -$15,824
net cash flow = $90,816
Answer:
NPV = $ 87,592.90
Explanation:
Net present value is calculated by taking the Present Day (discounted) value of all future Net Cash Flow based on the Business Cost of Capital and subtracting the Initial cost of the Investment.
<u>Calculation of Net present value (Financial Calculator)</u>
Period and Cash flow
CF0 = ($900,000)
CF1 = $200,000
CF2 = $200,000
CF3 = $200,000
CF4 = $200,000
CF5 = $200,000
CF6 = $300,000
Cost of Capital = 8%
NPV = $ 87,592.90