1. Kelly Manufacturing Company is considering the following investment proposal:

Question

1.      Kelly Manufacturing Company is considering the following investment proposal:

Original Investment                                         $15,000

        Operations (per year for four years)

                    Cash receipts                                       $10,000
            Cash expenditures                                  5,000

        Salvage value of equipment after four years  $1,000

        Discount Rate                                                  10%

What is the net present value for the investment over the four year timeframe, assuming no taxes are paid? (tip: don

Explanation / Answer

Hi,

Please find the answer as follows:

NPV = -15000 + (10000 - 5000)/(1+.10)^1 + (10000 - 5000)/(1+.10)^2 + (10000 - 5000)/(1+.10)^3 + (10000 - 5000)/(1+.10)^4 + 1000/(1+.10)^4 = 1532.34

Thanks.

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