A retailer is looking to expand operations at all of their stores for an initial

Question

A retailer is looking to expand operations at all of their stores for an initial investment $680. This investment will be depreciated on a straight line basis over the project's 8 year life. This expansion is expected to produce annual cash inflows of $570 in each year over the life of the project, while also producing annual cash outflows of $300 in each year over the life of the project. What is the project's NPV if the corporate tax rate is 36% and the project's required rate of return is 7.25%?

$___________________

Place your answer in dollars and cents without the use of a dollar sign or a comma. If applicable, negative values should be entered with a minus sign in front of the number. Work all analysis out using at least 4 decimal places of accuracy.

Explanation / Answer

Cash FLow since year 1 after deducting the tax = 570*(1-36%)-300

YEAR CASH FLOW Present Value 0 680 680 1 64.8 60.41958 2 64.8 56.33527 3 64.8 52.52706 4 64.8 48.97628 5 64.8 45.66553 6 64.8 42.57858 7 64.8 39.70031 8 64.8 37.01661 NPV -296.7808

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