Question

A project is expected to create operating cash flows of $24,500 a year for three years. The initial cost of the fixed assets is $55,000. These assets will be worthless at the end of the project. An additional $4,000 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of return is 10 percent

Answer 1

$4,933.13

Step-by-step explanation:

The computation of the net present value is shown below:

Year Cash flow PVF at 10% Present value

0 -$59,000 1.000 $(59,000.00)

1 $24,500 0.909 $22,272.73

2 $24,500 0.826 $20,247.93

3 $28,500 0.751 $21,412.47

Net present value $4,933.13