Calculate the net present value of a project with a net investment of $20,000 fo

Question

Calculate the net present value of a project with a net investment of $20,000 for equipment and an additional net working capital investment of $5,000 at time 0. the project is expected to generate net cash flows of $7,00 per year over a 10 year estimated economic life. In addition the net working capital will be recovered at the end of the project. the required return on the project is 11 percent and the company has a marginal tax rate of 40 percent. What is the meaning of the computed net present value figure?

Explanation / Answer

The Computed net present value of cash flow is $-19116.62 meaning thereby the net present value of the project is negative and project will give the negative return of $-19116.62 over its life of the project.

Below are the calculation which shows the how to determine net present value of the project.

Year Net Inflow/Outflow Discounted cash Flow (CF/(1+r)^n) 0 -$25,000.00 -$25,000.00 1 $700.00 $630.63 2 $700.00 $568.14 3 $700.00 $511.83 4 $700.00 $461.11 5 $700.00 $415.42 6 $700.00 $374.25 7 $700.00 $337.16 8 $700.00 $303.75 9 $700.00 $273.65 10 $5,700.00 $2,007.45 NPV -$19,116.62

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.