Your storage firm has been offered $96,300 in one year to store some goods for one...
Your storage firm has been offered $96,300 in one year to store some goods for one year. Assume your costs are $95,000, payable immediately, and the cost of capital is 8.5%. Should you take the contract?
Homework Answers
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=96,300/1.085
=88755.76
NPV=Present value of inflows-Present value of outflows
=88755.76-95,000
=($6244.24)(Approx)(Negative).
Hence since net present value is negative;contract should be rejected.
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