A project will produce an operating cash flow of $7,300 a year for three years.The initial cash outlay for equipment will be $11,600.The net aftertax salvage value of $3,500 will be received at the end of the project.The project requires $800 of net working capital that will be fully recovered.What is the net present value of the project if the required rate of return is 11 percent?

Question

Quizplus · Accepted Answer

NPV = -$11,600 - 800 + $7,300[(1 - 1/1.11³)/.11] + ($3,500 + 800)/1.11³ = $8,583.24

A Project Will Produce an Operating Cash Flow of $7,300