NARRBEGIN: Exhibit 9-1
Exhibit 9-1
A project requires an initial investment in equipment and machinery of $10 million.The equipment is expected to have a 5-year lifetime with no salvage value and will be depreciated on a straight-line basis.The project is expected to generate revenues of $5.1 million each year for the 5 years and have operating expenses (not including depreciation)amounting to 1/3 of revenues.
-Refer to Exhibit 9-1.Assume the tax rate is 40%,and the cost of capital is 10%.What is the net present value of the project?

Question

Quizplus · Accepted Answer

Cash flow from year 1 to year 5 is the same. 11ea7e38_8c56_0f9a_a2f7_21c2cdb37a6f_TB2250_00 NPV = -10 + 2.84/1.1 + 2.84/1.1² + 2.84/1.1³+ 2.84/1.1⁴ + 2.84/1.1⁵= 0.77m

NARRBEGIN: Exhibit 9-1 Exhibit 9-1