What is the net present value of a replacement project whose cash flows are -$981,000; $499,000;...

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What is the net present value of a replacement project whose cash flows are -$981,000; $499,000;...

What is the net present value of a replacement project whose cash flows are -$981,000; $499,000; $656,000; and $149,000 for years 0 through 3, respectively? The firm has decided to assume that the appropriate cost of capital is 16.6% p.a. (round to the nearest dollar)

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Answer 1

Answer #1

NPV of Project =PV of Cash Flows -Investment =499000/(1+16.6%)+656000/(1+16.6%)^2+149000/(1+16.6%)^3-981000=
23461.24
NPV is positive hence replacement project should be accepted

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Answer 2

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