Question

what is the npv of a 6-year project that costs $100,000, has annual revenues of $50,000, and annual costs of $15,000? assume the investment is an asset that will be depreciated straight-line over 6 years to a salvage value of $0, the corporate tax rate is 21% and the discount rate is 14%. round you answer to the nearest whole dollar amount (zero decimal places).

Answer 1

The NPV of the 6-year project is $24,095. This is calculated by finding the present value of the project's cash flows and subtracting the initial investment.

Step-by-step explanation:

The NPV (Net Present Value) of a 6-year project can be calculated by finding the present value of the project's cash flows and subtracting the initial investment. The present value of the cash flows can be calculated using the formula:

PV = (Revenues - Costs) / (1 + Discount Rate)^Year

Applying this formula to each year of the project, the present values would be:

• Year 1: ($50,000 - $15,000) / (1 + 0.14)^1 = $28,070
• Year 2: ($50,000 - $15,000) / (1 + 0.14)^2 = $24,643
• Year 3: ($50,000 - $15,000) / (1 + 0.14)^3 = $21,598
• Year 4: ($50,000 - $15,000) / (1 + 0.14)^4 = $18,896
• Year 5: ($50,000 - $15,000) / (1 + 0.14)^5 = $16,502
• Year 6: ($50,000 - $15,000) / (1 + 0.14)^6 = $14,386

Summing up the present values: $28,070 + $24,643 + $21,598 + $18,896 + $16,502 + $14,386 = $124,095

Finally, subtracting the initial investment of $100,000, the NPV of the project is $24,095.

Answer 2

The NPV of a 6-year project can be calculated by finding the present value of the project's cash flows and subtracting the initial investment. In this case, the project costs $100,000 and has annual revenues of $50,000 and annual costs of $15,000. The NPV of the project is $36,613.

Step-by-step explanation:

The NPV (Net Present Value) of a 6-year project can be calculated by finding the present value of the project's cash flows and subtracting the initial investment. In this case, the project costs $100,000 and has annual revenues of $50,000 and annual costs of $15,000. The project's cash flows can be represented as follows:

• Year 1: $50,000 - $15,000 = $35,000
• Year 2: $50,000 - $15,000 = $35,000
• Year 3: $50,000 - $15,000 = $35,000
• Year 4: $50,000 - $15,000 = $35,000
• Year 5: $50,000 - $15,000 = $35,000
• Year 6: $50,000 - $15,000 = $35,000

To calculate the NPV, we need to find the present value of these cash flows using the discount rate of 14%:

Year 1: $35,000 / (1 + 0.14)^1 = $30,701

Year 2: $35,000 / (1 + 0.14)^2 = $26,885

Year 3: $35,000 / (1 + 0.14)^3 = $23,584

Year 4: $35,000 / (1 + 0.14)^4 = $20,782

Year 5: $35,000 / (1 + 0.14)^5 = $18,375

Year 6: $35,000 / (1 + 0.14)^6 = $16,286

Now, we can sum up the present values of these cash flows:

$30,701 + $26,885 + $23,584 + $20,782 + $18,375 + $16,286 = $136,613

Finally, we subtract the initial investment of $100,000 from the total present value:

$136,613 - $100,000 = $36,613

Therefore, the NPV of the 6-year project is $36,613.