Project A requires an original investment of $50,000. The project will yield cas
ID: 2478968 • Letter: P
Question
Project A requires an original investment of $50,000. The project will yield cash flows of $15,000 per year for 7 years. Project B has a calculated net present value of $13,500 over a 4-year life. Project A could be sold at the end of 4 years for $25,000.
Below is a table for the present value of $1 at compound interest.
Determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. Enter negative values as negative numbers.
$____?_______
Explanation / Answer
Net present value
Outflow (50,000)
Inflow(15,000*3.037) 45,555
Salvage(25,000*.636) 15,900
Net present value of A $11,455
Net present value
Outflow (50,000)
Inflow(15,000*3.037) 45,555
Salvage(25,000*.636) 15,900
Net present value of A $11,455
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.