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Aerospace Dynamics will invest $125,000 in a project that will produce the following cash flows. The...

Aerospace Dynamics will invest $125,000 in a project that will produce the following cash flows. The cost of capital is 9 percent. (Note that the fourth year’s cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

  

Year Cash Flow
1 $ 35,000
2 55,000
3 48,000
4 (45,000 )
5 90,000

a. What is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
  

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Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=35,000/1.09+55,000/1.09^2+48,000/1.09^3+90,000/1.09^5

=$173961.12(Approx).

Present value of outflows=125,000+45,000/1.09^4

=$156879.13(Approx).

NPV=Present value of inflows-Present value of outflows

=$173961.12-156879.13

=$17081.99(Approx).

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