Bruno's lunch counter is expanding and expects operating cash flows of $27,300 a year for 4...
Bruno's lunch counter is expanding and expects operating cash flows of $27,300 a year for 4 years as a result. This expansion requires $65,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $4,000 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 14 percent?
Homework Answers
Ans $ 12912.67
| Year | Project Cash Flows (i) | DF@ 14% | DF@ 14% (ii) | PV of Project ( (i) * (ii) ) |
| 0 | -69000 | 1 | 1 | (69,000.00) |
| 1 | 27300 | 1/((1+14%)^1) | 0.877 | 23,947.37 |
| 2 | 27300 | 1/((1+14%)^2) | 0.769 | 21,006.46 |
| 3 | 27300 | 1/((1+14%)^3) | 0.675 | 18,426.72 |
| 4 | 31300 | 1/((1+14%)^4) | 0.592 | 18,532.11 |
| NPV | 12,912.67 | |||
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