Question

he Glowing company could produce an operating cash flow of $56,200 a year for 5 years. The initial fixed asset investment in the project will be $238,900. The net aftertax salvage value is estimated at $67,000 and will be received during the last year of the project's life. What is the net present value of the project if the required rate of return is 15.2 percent

Answer 1

-$18,375

Step-by-step explanation:

The computation of the net present value is shown below;

In the case when the operating cash flow is $56,200 for 5 years and the rate of return is 15.2% so the present value is $187,502 by using the financial calculator

In the case when the net after tax salvage value is $67,000 for the 5 year and the rate of return is 15.2% so the present value is $33,023 by using the financial calculator

Now the net present value is

= $18,7502 + $33,023 - $238,900

= -$18,375