(Ignore income taxes in this problem.) Dunay Corporation is considering investin

Question

(Ignore income taxes in this problem.) Dunay Corporation is considering investing $810,000 in a project. The life of the   project would be 9 years. The project would require additional working capital of $24,000, which would be released for use   elsewhere at the end of the project. The annual net cash inflows would be $162,000. The salvage value of the assets used in the   project would be $41,000. The company uses a discount rate of 17%. Required: Compute the net present value of the project. Required: Compute the net present value of the project.

Explanation / Answer

PARTICULARS/YEAR 0 1 2 3 4 5 6 7 8 9 Net Cashinfow 162000 162000 162000 162000 162000 162000 162000 162000 162000 Initial Investment -810000 Working Capital used -24000 Working Capital released 24000 Residual Value 41000 NET CASHFLOW -834000 162000 162000 162000 162000 162000 162000 162000 162000 227000 P.V. Factor 1.0000 0.8547 0.7305 0.6244 0.5337 0.4561 0.3898 0.3332 0.2848 0.2434 P.V. of cashflow -834000.00 138461.54 118343.20 101148.03 86451.31 73890.01 63153.85 53977.65 46134.74 55252.65 NPV (17%) -97187.03 HENCE, IT IS NOT VIABLE AS NPV IS NEGATIVE.

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