Question

lion-djusted discount rate of 17 percent. 13-8 A project with a cost of $10,000 is expected to produce a net cash flow a year for the next four years. The cost of capital is 10 percent. (a) What is the net present value of the project? (b) If an additional networking capital of $2.000 were required over the me the project, what would be its effect on the net present value duce a net cash flow of $4,000

13-8 Everything is the same except that a cost of $25,000 … net cash flow of $6,000 a year for the next six years. The cost of capital is 13%.

(b) If an additional net working capital of $3,000

Answer 1

a) Determination of Net Present Value :- Cash Year PVF @ 13° flows S (25,000) 1.0000 6,000 0.8850 6,000 0.7831 6,000 0.6931 6,000 0.6133 6,000 0.5428 Present value $ (25,000) 5,310 4,699 4,158 3,680 3,257 2,882 6,000 0.4803 Net Present Value (1,015) Net Present Value is - $ 1,015/. PVF @ 13° flows b) Determination of Net Present Value - Cash Present Year value $ (28,000) 1.0000 (28,000) 6,000 0.8850 5,310 6,000 0.7831 4,699 6,000 0.6931 4,158 6,000 0.6133 3,680 6,000 0.5428 3,257 6,000 0.4803 2,882 3,000 0.4803 1,441 Net Present Value (2,574) Net Present Value is - $ 2,574).