Question

Fly High Co. is expanding and expects operating cash flows of $65,000 a year for four years as a result. This expansion requires $105,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $7,000 of net working capital, which will be recovered at the end of the project. What is the net present value of this expansion project at a required rate of return of 15 percent

Answer 1

The net present value of this expansion project is $77,575.87.

Step-by-step explanation:

The Net Present Value of the Expansion can be calculated as follows

($112,000) CFj

$65,000 CFj

$65,000 CFj

$65,000 CFj

$72,000 CFj

I/YR 15%

Shift NPV $77,575.87