A project is expected to create operating cash flows of $37,600 a year for 3 years.The initial cost of the fixed assets is $98,000.These assets will be worthless at the end of the project.Also,$3,200 of net working capital will be required throughout the life of the project.What is the project's net present value if the required rate of return is 14 percent?

Question

Quizplus · Accepted Answer

NPV = −$98,000 − $3,200 + $37,600[(1 − 1 / 1.14³)/ 0.14] + $3,200 / 1.14³ = −$11,746.73

A Project Is Expected to Create Operating Cash Flows of $37,600