(Ignore income taxes in this problem.) The Connelly Company has funds available
ID: 2390056 • Letter: #
Question
(Ignore income taxes in this problem.) The Connelly Company has funds available to invest in the following project:
Initial investment in new machinery...... 200,000
Annual net cash inflows from operations...... 60,000
Working capital investment required now.....80,000
Single cash inflow for an overhaul of the machinery at the end of three years....50,000
Salvage value of the machinery in seven years..... 40,000
Life of the project...... 7 years
Required rate of return..... 18%
The working capital needed now would be released at the end of the seven years for investment elsewhere.
The present value of the salvage value to be received in seven years is:
Answer
A. $14,800
B. $12,560
C.$14,160
D.$152,480
Explanation / Answer
40,000*0.3139 = 12,556 Answer: 12,560
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