A project will produce an operating cash flow of $38,400 a year for 4 years.The initial cash outlay for equipment will be $57,300 and the net after-tax salvage value of $8,415 will be received at the end of the project.The project initially requires $1,200 of net working capital that will be fully recovered at project's end.What is the net present value of the project if the required rate of return is 16 percent?

Question

Quizplus · Accepted Answer

NPV = −$57,300 − $1,200 + $38,400[(1 − 1 / 1.16⁴)/ 0.16] + ($8,415 + $1,200)/ 1.16⁴ = $54,260.42

A Project Will Produce an Operating Cash Flow of $38,400