Answer:
$6,508.54
Explanation:
Calculation for what is the NPV of this project
First step is to calculate the operating cash flow (OCF).m
Operating Cash Flow = $69,000 (1 - .34) + ($187,400 /4)(.34)
Operating Cash Flow = $69,000 (0.66) + ($46,850)(.34)
Operating Cash Flow=$45,540+$15,929
Operating Cash Flow= $61,469
Now let calculate the Net present value (NPV)
Net Present Value= -$187,400 -9,000 + ($61,469 ×{1 - [1 / (1 + .12)^4]} / .12) + {$9,000 + [$25,000 × (1 - .34)]} / (1 + .12)^4
Net Present Value= -$187,400 -9,000 + ($61,469 ×{1 - [1 / (1.12)^4]} / .12) + {$9,000 + [$25,000 × (0.66)]} / (1.12^)4
Net Present Value= -$187,400 -9,000 + ($61,469 ×{1 - [1 / 1.57]} / .12) + {$9,000 + $16,500)]} / 1.57
Net Present Value= $6,508.54
Therefore the the NPV of this project will be $6,508.54
