QUESTION 2 You are analyzing a project with 5-year life. The project requires a

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QUESTION 2 You are analyzing a project with 5-year life. The project requires a capital investment of $10000 now, and it will generate uniform annual revenue of $6000 at the end of each year. Further, the project will have a salvage value of $2500 at the end of the fifth year and it will require $3000 each year for the operation. What is the net value of the project using year 5 as the basis, considering a 10% annual interest rate.(round your answer to the nearest integer, e.g. enter 12345 if your answer is 12,345.2; enter 12346 if your answer is 12,345.7)

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Solution :-

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Cash Flow Year Project PVF@10% PV 0 Initial Cost     -10,000.00        1.000     -10,000.00 1 Net Income            3,000.00        0.909               2,727 2 Net Income            3,000.00        0.826               2,479 3 Net Income            3,000.00        0.751               2,254 4 Net Income            3,000.00        0.683               2,049 5 Net Income            3,000.00        0.621               1,863 5 Salvage Value            2,500.00        0.621               1,553 NPV               2,925 Net Income Annual Revenue - Annual Expenses 6000 - 3000 3000 The NPV is 2925

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