(Ignore income taxes in this problem.)Jim Bingham is considering starting a small catering business.He would invest $125,000 to purchase a delivery van and various equipment and another $60,000 for inventories and other working capital needs.Rent for the building used by the business will be $35,000 per year.In addition to the building rent,annual cash outflow for operating costs will amount to $40,000.The annual cash inflow from the business will amount to $120,000.Jim wants to operate the catering business for only six years.He estimates that the equipment could be sold at that time for 4% of its original cost.Jim uses a 16% discount rate.All cash flows,except for the initial investment,would occur at the ends of the years.The investment in working capital would be returned at the end of the six years.
Required:
Compute the net present value of this investment.

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The Answer of (Ignore income taxes in this problem.)Jim Bingham is considering starting a small catering business.He would invest $125,000 to purchase a delivery van and various equipment and another $60,000 for inventories and other working capital needs.Rent for the building used by the business will be $35,000 per year.In addition to the building rent,annual cash outflow for operating costs will amount to $40,000.The annual cash inflow from the business will amount to $120,000.Jim wants to operate the catering business for only six years.He estimates that the equipment could be sold at that time for 4% of its original cost.Jim uses a 16% discount rate.All cash flows,except for the initial investment,would occur at the ends of the years.The investment in working capital would be returned at the end of the six years.
Required:
Compute the net present value of this investment.

(Ignore Income Taxes in This Problem