Question

Respass Corporation has provided the following data concerning an investment project that it is considering:

Initial investment $160,000
Annual cash flow $54,000 per year
Salvage value at the end of the project $11,000
Expected life of the project 4 years
Discount rate 15%
The net present value of the project is closest to:____.
A) $67,000.
B) $160,516.
C) $516.
D) $(5,776).

Answer 1

45,811.70Step-by-step explanation:

Net present value is the present value of after-tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator

Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.

When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.

Cash flow in year 0 = $-160,000

Cash flow in year 1 - 3 = $54,000

Cash flow in year 4 = 11,000

I = 15

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute