Question

Turnbull Corp. is in the process of constructing a new plant at a cost of $30 million. It expects the project to generate cash flows of $13,000,000, $23,000,000, and 29,000,000 over the next three years. The cost of capital is 20 percent. What is the net present value of this project? (Do not round intermediate computations. Round final answer to nearest million dollars) Group of answer choices $10 mil. $14 mil. $12 mil. $16 mil.

Answer 1

Answer:

$14 mil.

Explanation:

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 = $-30 million

Cash flow in year 1 = $13,000,000

Cash flow in year 2 = $23,000,000

Cash flow in year 3 = 29,000,000 

I = 20%

NPV = $13,587,630

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