ould be 6 years The project would require additional working capital of $29,000,

Question

ould be 6 years The project would require additional working capital of $29,000, which would be released for use elsewhere at the end of the project. The annual net cash inflows would be $168,000. The salvage value of the assets used in the project would be $39,000. The company uses a discount rate of 13%. (Ignore income taxes) Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables Required: Compute the net present value of the project. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.) Net present value

Explanation / Answer

Answer

The net present value of the project:

= -Initial Investment -working Capital +Annual Cash Flows*PVIFA +Salvage Value*PVIF

= -790000 - 29000 + 168000 * PVIFA(13%,6) + 39000 * PVIF(13%,6)

=-819000 + 168000*3.9975 + 39000*0.4803

= -819000 + 671580 + 18731.70

= -128688.30

Hence the net present value of the project is -128688

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