Question
In: Finance
The Sisyphean Company is planning on investing in a new project. This will involve the purchase...
The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $450,000. The Sisyphean Company expects cash inflows from this project as detailed below:
|
Year One |
Year Two |
Year Three |
Year Four |
|
$200,000 |
$225,000 |
$275,000 |
$200,000 |
The appropriate discount rate for this project is 16%.
The NPV for this project is closest to:
Solutions
Expert Solution
| The NPV for this project is closest to $176,264.53 | ||||
| Statement showing Cash flows | ||||
| Particulars | Time | PVf 16% | Amount | PV |
| Cash Outflows | - | 1.00 | (450,000.00) | (450,000.00) |
| PV of Cash outflows = PVCO | (450,000.00) | |||
| Cash inflows | 1.00 | 0.8621 | 200,000.00 | 172,413.79 |
| Cash inflows | 2.00 | 0.7432 | 225,000.00 | 167,211.65 |
| Cash inflows | 3.00 | 0.6407 | 275,000.00 | 176,180.86 |
| Cash inflows | 4.00 | 0.5523 | 200,000.00 | 110,458.22 |
| PV of Cash Inflows =PVCI | 626,264.53 | |||
| NPV= PVCI - PVCO | 176,264.53 | |||
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