Juliar Inc. has provided the following data concerning a proposed investment pro
ID: 2431040 • Letter: J
Question
Juliar Inc. has provided the following data concerning a proposed investment project: (Ignore income taxes.) Initial investment $ 310,000 Life of the project 11 years Annual net cash inflows $ 48,000 Salvage value $ 38,000 The company uses a discount rate of 9%.
Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.
Required: Compute the net present value of the project. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Net present value $ =?
Explanation / Answer
Present Value of annual net cash inflows $ 48,000 x 6.805 = $ 3,26,640 Present Value of salvage Value $ 38,000 x 0.388 = $ 14,744 Present Value of All cash inflows $ 3,41,384 Less:Initial cost of project $ 3,10,000 Net Present Value $ 31,384 Working: a. Present Value of annuity of 1 = (1-(1+i)^-n)/i Where, = (1-(1+0.09)^-11)/0.09 i 9% = 6.805 n 11 b. Present Value of 1 = (1+i)^-n = (1+0.09)^-11 = 0.388
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