The Bolt Company is considering investing in a wind turbine to generate its own

Question

The Bolt Company is considering investing in a wind turbine to generate its own power. Any unused power will be sold back to the local utlity company. Between cost savings and new revenues, the company expects to generate $1,363,250 per year in net cash inflows from the turbine. The turbine would cost $4.1 million and is expected to have a 5-year useful life with no residual value. Calculate the NPV assuming the company uses a 12% hurdle rate (Round your answer to the nearest whole dollar) (Click the icon to view the present value of an annuity table) (Click the icon to view (Cick the icon to view the present value table ) (Click the icon to view the future value table) the future value of an annuity table.) The NPV is S

Explanation / Answer

Net Present Value = $     8,14,516 year Cash flow 12% Present value factor Present value Initial cost 0 $ -41,00,000 1 $    -41,00,000 Cash Inflow 1 - 5 $   13,63,250 3.605 $      49,14,516 Salvage value 5 $                  -   0.567 $                     -   Net Present Value $        8,14,516

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