MBA 579 (Summer 2018) Homework: Chapter 11 Hork Score: 0 of 2 pts 1 of 10 (9 com
ID: 1175606 • Letter: M
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MBA 579 (Summer 2018) Homework: Chapter 11 Hork Score: 0 of 2 pts 1 of 10 (9 complete) | score: 71.43%, ults P11-1 (similar to) Question Help * (Related to Checkpoint 11.1) (Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $4,000,000 and would generate annual net cash inflows of $1,200,000 per year for 6 years. Calculate the project's NPV using a discount rate of 7 percent. If the discount rate is 7 percent, then the projects NPV is s (Round to the nearest dollar)Explanation / Answer
NPV is equal to the Present value of the future inflows - Present value of outflow
NPV = -4,000,000 + 1,200,000/1.07 + 1,200,000/1.072 + 1,200,000/1.073 + 1,200,000/1.074 + 1,200,000/1.075 + 1,200,000/1.076
NPV = $1,719,847.59 = $1,719,848
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