Juliar Inc. has provided the following data concerning a proposed investment pro
ID: 2492936 • Letter: J
Question
Juliar Inc. has provided the following data concerning a proposed investment project: (Ignore income taxes.) Initial investment $ 180,000 Life of the project 11 years Annual net cash inflows $ 35,000 Salvage value $ 25,000 The company uses a discount rate of 13%. Click here to view Exhibit 11B-1 and Exhibit 11B-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.)
Explanation / Answer
Initial Investment = $180,000
Depreciation = (180,000 - 25,000) / 11 = $14,091
Annual Net Cashflow = $35,000
Annual Net Operating Cashflow = Annual Net Cashflow - Depreciation
= 35,000 - 14,091 = $20,909
Present Value factor for 11 years @13% = 5.687
Net present Value = -180,000 + 20,909 * 5.687 = - $61,090
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