Dul Corporation has provided the following data concerning an investment project
ID: 2496565 • Letter: D
Question
Dul Corporation has provided the following data concerning an investment project that it is considering:
Initial investment.............................................. $170,000
Working capital.................................................. $64,000
Annual cash flow............................................... $60,000 per year
Salvage value at the end of the project.............. $18,000
The working capital would be released for use elsewhere at the end of the project in 3 years. The company’s discount rate is 7%.
The net present value of the project is closest to: a. $(9,648) b. $54,352 c. $(61,872) d. $10,000
Explanation / Answer
Solution:
Caluculation of Net Present Value:
Where :
Ct = Net Cash Flow During the Period,
Co = Initial Investment
= 60,000 / ( 1+ 0.7)3 - 1,70,000
= $ 10,000
Net Present Value = Ct / ( 1 + r)t - CoRelated Questions
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