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A project ends after 4 years. The after tax salvage value is 12,860 and the released...

A project ends after 4 years. The after tax salvage value is 12,860 and the released working capital equals 40,000 at the end of the project. Assume a 9.82% WACC and compute the present value of the terminal cash flows.

Solutions

Expert Solution

Net Present Value = Present Value of Future cash flow - Initial Investment

Present Value of terminal cash flow = Future Value / ( 1 + WACC)^ Number of year

= (12860 + 40000) / ( 1 + 9.82%)^4

= 52860 / ( 1.0982)^4

= 52860 / 1.45454029

= 36341.378

Initial Investment will be the working capital that is invested in the project.

Initial Investment = 40,000

Net Present Value = 36341.378 - 40,000

= -3658.622

jeff jeffy answered 2 years ago
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