A plant producing painter metal constructions plans to invest in a new painting line that costs...
A plant producing painter metal constructions plans to invest in a new painting line that costs 300 TEUR. The EUL of the line is 10 years and the end of year 10 it may be sole for 25 TEUR. The project will generate free cash flow of 50 TEUR in 1 year, and 100 TEUR from Year to year 10. Calculate the NPV of the project if the discount rate is 7%, show the calculation
Homework Answers
Initial cost in year 0= 300 TEUR
So, Cash flow in year 0 = -300 TEUR
1st year cash flow = 50 TEUR
2nd - 10th Year cashflow = 100 TEUR
10th Year additional cashflow by selling plant = 25 TEUR
So, NPV = present value of all cash flows discounted at 7%
=- 300 + 50/(1+0.07) + 100/1.072+ ...+100/1.0710 + 25/1.0710
= -300 + 46.7290+ 87.3439+ .......+ 50.8349+ 12.7087
= 368.34 TEUR
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A plant producing painter metal constructions plans to
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