A company is considering investing $810,000 in a project. The life of the projec

Question

A company is considering investing $810,000 in a project. The life of the project would be 9 years. The project would require additional working capital of $24,000, which would be released for use elsewhere at the end of the project. The annual net cash inflows would be $162,000. The salvage value of the assets used in the project would be $41,000. The company uses a discount rate of 12%. Required: Compute the net present value of the project and say if it should be accepted. SHOW ALL COMPUTATIONS COMPLETELY (Not just words or abbreviations)

Explanation / Answer

Hi, Please find the answer as follows: NPV = - 810000 - 24000 + 162000/(1+.12)^1 + 162000/(1+.12)^2 + 162000/(1+.12)^3 + 162000/(1+.12)^4 + 162000/(1+.12)^5 + 162000/(1+.12)^6 + 162000/(1+.12)^7 + 162000/(1+.12)^8 + 162000/(1+.12)^9 + 41000/(1+.12)^9 + 24000/(1+.12)^9 = 52616.12 Thanks.

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