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Platinum Water Food is evaluating a project that would cost 8,950 dollars today. The project is...

Platinum Water Food is evaluating a project that would cost 8,950 dollars today. The project is expected to produce annual cash flows of 757.17 dollars forever with the first annual cash flow expected in 1 year. The cost of capital associated with the project is 6.12 percent and the project’s internal rate of return is 8.46 percent. What is the net present value (NPV) of the project?

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Answer #1

Initital Investment = 8,950 dollars

Annual Cash Flows = 757.17 dollars

Cost of capital associated with project = 6.12%

Present value of Cash flows = Annual Cash Flow / Cost of Capital = 757.17 dollars / 6.12% =12,372.0588 dollars

NPV of the Project = Present value of Cash Flows - Initial Investment

= 12,372.0588 dollars - 8,950 dollars

= 3,422.06 dollars

Therefore, Net Present Vale (NPV) of the project is 3,422.06 dollars

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