Citrus Company is considering a project that has estimated annual net cash flows
ID: 2457219 • Letter: C
Question
Citrus Company is considering a project that has estimated annual net cash flows of $34,080 for seven years and is estimated to cost $160,000. Citrus's cost of capital is 20 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 S1.) (Use appropriate factors) from the tables provided. Negative amount should be indicated by a minus sign. Round your final answers to 2 decimal places.) Net Present Value Based on NPV, determine whether project is acceptable to Citrus.Explanation / Answer
Computation of Net present value
Years Cash flows Discount @20% PV cash flows
1 34080 0.8333 28398.86
2 34080 0.6944 23665.15
3 34080 0.5787 19722.1
4 34080 0.4823 16436.78
5 34080 0.4019 13696.75
6 34080 0.3349 11413.39
7 34080 0.2791 9511.73
Total PV cash flows 122844.76
less: initial investment (160000)
NPV (37155.24)
Project is rejected because NPV is negative.