Dunay Corporation is considering investing $800,000 in a project The life of the

Question

Dunay Corporation is considering investing $800,000 in a project The life of the project would be 11 years The project would require additional -working capital of $30,000. which would be released for use elsewhere at the end of the project The annual net cash inflows would be $170,000 The salvage value of the assets used in the project would be $40,000 The company uses a discount rate of 18%. (Ignore income taxes) Click here to view Exhibit 11B-1 and Exhibit 11B-2 to determine the appropriate discount factor(s) using tables. 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.)

Explanation / Answer

Net present value = Annual Cash inflows*PVAF - Initial investment

=170000*4.656+(40000+30000)*0.162-(800000+30000)

=-27140

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