The Horizon Company will invest $60,000 in a temporary project that will generat

Question

The Horizon Company will invest $60,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow 1 $ 15,000 2 25,000 3 40,000 The firm will also be required to spend $10,000 to close down the project at the end of the three years. a. Compute the net present value if the cost of capital is 10 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)

Note : answer not = $ 3,163.04

Explanation / Answer

Pls note answer -3163.04 is also correct if you take the discount factor by excel formula. If you manually fetch discount factor and type the same it is -3185 .The differecne is rounding off difference only , no mistake

details Year 0 Year 1 Year 2 Year 3 Investment          (60,000) Cash Flow                   15,000                25,000                40,000 Closing down cost              (10,000) Net Cash Flow          (60,000)                   15,000                25,000                30,000 Discount factor @10%                       1                     0.909                  0.826                  0.751 PV of cash flows          (60,000)                   13,635                20,650                22,530 NPV $ (3,185.00)

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