Ch. 9 & 10 NPV, IRR. Cepital Budgeting Extre Credit Practice 8. value 3.16 point

Question

Ch. 9 & 10 NPV, IRR. Cepital Budgeting Extre Credit Practice 8. value 3.16 points A project is expected to create operating cesh fows of $26.500 a year for three years. The initial cost of the fixed ascetcis $55,000 These assets will be wornhiess at the end of the project An additionel $5.000 of net working capitaol will be reaured throughout the life of the project What is the projects net present value if the required rate of retum Is 15 percent? O $505 47 O $156667 O $1206.95 O s879305 D $379308

Explanation / Answer

Initial cash flow = Initial cost 55000 NWC 5000 60000 Year 4 Cash flow - OCF 26500 Recovery of NWC 5000 31500 Year Cash flow PV factor @ 15% PV of cash flows 0 -60000 1 -60000 1 26500 0.869565 23043.48 2 26500 0.756144 20037.81 3 31500 0.657516 20711.76 NPV 3793.047 (E) Please provide feedback…. Thanks in advance…. :-)

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