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A company is considering a 3-year project that requires an initial installed equipment cost of $14,000....

A company is considering a 3-year project that requires an initial installed equipment cost of $14,000. The project engineer has estimated that the operating cash flows will be $4,000 in year 1, $6,000 in year 2, and $9,000 in year 3. The new machine will also require a parts inventory of $1,000 at the beginning of the project (assume this inventory can be sold for cost at the end of the project). It is also estimated that the equipment can be sold as salvage for an after tax salvage cash flow of $5,000 at the end of the project. If the tax rate is 37% and the required rate of return is 15%, what is the net present value (NPV) of this project?

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Answer #1

YEAR Cash flow -$15,000 $4,000 $6,000 $15,000 pv @ 15% 1.000 0.8696 0.7561 0.6575 discounted value -$15,000.00 $3,478.26 $4,5

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