Citrus Company is considering a project that has estimated annual net cash flows
ID: 2456794 • Letter: C
Question
Citrus Company is considering a project that has estimated annual net cash flows of $28,755 for nine years and is estimated to cost $135,000. Citrus’s cost of capital is 11 percent.
Determine the net present value of the project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round your final answers to 2 decimal places.)
Citrus Company is considering a project that has estimated annual net cash flows of $28,755 for nine years and is estimated to cost $135,000. Citrus’s cost of capital is 11 percent.
Explanation / Answer
Computing Net Present value
Year Cash flows Discount@ 11% PV cash flows
1 28755 0.9009 25905.38
2 28755 0.8116 23337.56
3 28755 0.7312 21025.66
4 28755 0.6587 18940.92
5 28755 0.5935 17066.09
6 28755 0.5346 15372.42
7 28755 0.4817 13851.28
8 28755 0.4339 12476.79
9 28755 0.3909 11240.33
Total PV cash flows 159316.43
less: initial investment (135000)
NPV 24216.43.