A project is expected to generate annual cash flows of $22,500 during the next three years....

Question

Question

A project is expected to generate annual cash flows of $22,500 during the next three years. The initial investment of this pr

Answer 1

Answer #1

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

=22500/1.1+22500/1.1^2+22500/1.1^3+3000/1.1^3

=$58208.11(Approx)

Present value of outflows=(50,000+3000)=$53000

NPV=Present value of inflows-Present value of outflows

=58208.11-53000

=$5208(Approx)

NOTE:Working capital investment would be released at end of project life.

Answer 2

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