Question- I just want to know how $-452,442 got calculated for NPV? Dr. Phillip\
ID: 2775014 • Letter: Q
Question
Question- I just want to know how $-452,442 got calculated for NPV?
Dr. Phillip's Counseling Services is interested in starting a virtual counseling service for their clients. This 4-year project has an initial asset investment of $306,419, and initial net working capital investment of $27,385, and an annual operating cash flow of -$47,039. The fixed asset is fully depreciated over the life of the project and has no salvage value. The net working capital will be recovered when the project ends. The required return is 15 percent. What is the project's equivalent annual cost (EAC) for Dr. Phil's project? Enter any cash outflows as negative numbers and expected inflows as positive numbers.
Initial Cash Outflow: -$306,419 + -$27,385 = -$333,804
Operating Cash Flows: -$47,039
Terminal Year Cash Flow: -$47,039 + $27,385 = -$19,654
NPV @ 15% = $-452,442
NPV Keys: N = 4
I/Y = 15
PV = 452,442
FV = 0
CPT PMT = -$158,475
Explanation / Answer
Calculation Of Net Present Values at Discounted Rate of 15%pa Intial Outflow at beginning of Year 1 -306419 Initial Working Capital Outflow at beginning of Year 1 -27385 Annual Outflow at the end of year 1= (1/1+0.15)*(-47039) -40903.5 Annual Outflow at the end of year 2= (1/1+0.15)*(1/1+0.15)*(-47039) -35568.2 Annual Outflow at the end of year 3= (1/1+0.15)*(1/1+0.15)*(1/1+.15)*(-47039) -30928.9 Annual Outflow at the end of year 4= (1/1+0.15)*(1/1+0.15)*(1/1+0.15)*(1/1+0.15)*(-47039) -26894.7 Annual Outflows for 4 Years Discounted @15%pa=2.854*47039 -134295 Release of Working Capital at the end of 4th Year Annual Outflow at the end of year 4= (1/1+0.15)*(1/1+0.15)*(1/1+0.15)*(1/1+0.15)*(27385) 15657.46 Net Present Value of the Project -452442
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