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Question

1 r.12.L> |LTNormal] Subtitle Paragraph 1 No Spac.-. Heading ·A-2 erruption, please reactivate now. eactivate QUESTION 5-10 POINTS 1) Kimmel Company, has provided the following data concerning a proposed investment project: Initial investment ..$250,000 Life of the project Annual net cash inflows.. $32,000 Salvage value... 10 years S5,000 The company uses a discount hurdle rate of 15% to Required: Compute the net present value of the project. Please show all Computations Costs Initial Investment Annual Net Cash Inflows Salvage Value

Explanation / Answer

Net present value = -$88,166

Working:

Years 0 1-10 10 Initial investment -250000 Annual net cash inflows 32000 Salvage value 5000 Net cash flows -250000 32000 5000 Discount rate 15% 15% 15% Discounting factor 1 5.0187 0.2472 Present Value -250000 160598 1236 Net Present Value -88166

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