A company would like to invest in a project The investment cost are $125,000 at

Question

A company would like to invest in a project The investment cost are $125,000 at the beginning of the first period, $125.000 more at the beginning of the third period $300,000 more at the beginning of the fourth period, and $300,000 more at the beginning of the sixdh period The project has a 12-period useful life. The cash inflows at the end of period 6 through period 12 are $110,000, $110,000, $230,000, $230,000, $300,000, $300,000, and $320,000, respectively. The cost of capital in penod 1 through penod 12 is 5%. NOTE: Use at least 6 decimal places Do not use any comma in your answer You must show your calculation steps clearly on your spreadsheet The net present value of the project is $ The present value of the cashflow at the end of period 1 is The present value of the cashflow at the end of perniod 2 is The present value of the cashflow at the end of period 3 is The present value of the cashflow at the end of period 5 is The present value of the cashflow at the end of period 7 is The present value of the cashflow at the end of period 9 is The present value of the cashflow at the end of period 11 is

Explanation / Answer

Year Cash outflows Cash inflows Net cashflows PVF @ 5% Present value Cumulative present value 0 -125000 0 -125000 1 -125000 -125000 1 0 0 0 0.952381 0 -125000 2 -125000 0 -125000 0.907029 -113379 -238379 3 -300000 0 -300000 0.863838 -259151 -497530 4 0 0 0 0.822702 0 -497530 5 -300000 0 -300000 0.783526 -235058 -732588 6 0 110000 110000 0.746215 82083.69 -650504 7 0 110000 110000 0.710681 78174.95 -572329 8 0 230000 230000 0.676839 155673.1 -416656 9 0 230000 230000 0.644609 148260.1 -268396 10 0 300000 300000 0.613913 184174 -84222.1 11 0 300000 300000 0.584679 175403.8 91181.69 12 0 320000 320000 0.556837 178188 269369.7 NPV 269370 Net present value of project: 269370 Present value of cashflows at end of Year-1 -125000 Present value fo cashflows at the end of Year-2 -238379 Present value of cashflows at end of Year-3 -497530 Present value of cashflows at end of Year-5 -732588 Present value off cashflows at the end of Year-7 -572329 Present value of cashflows at end of Year-9 -268396 Present value of cashflows at end of Year-11 91181.69

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