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You are analyzing a project with 5-year life. The project requires a capital investment of $10000...

You are analyzing a project with 5-year life. The project requires a capital investment of $10000 now, and it will generate uniform annual revenue of $6000 at the end of each year. Further, the project will have a salvage value of $2500 at the end of the fifth year and it will require $3000 each year for the operation. What is the net value of the project using year 1 as the basis, considering a 10% annual interest rate._________(round your answer to the nearest integer, e.g. enter 12345 if your answer is 12,345.2; enter 12346 if your answer is 12,345.7)

Solutions

Expert Solution

Discount factor for each year = 1 / (1 + discount rate)year

The discount rate in this case is 10% as given in the question

Present value of each cash flow = cash flow * discount factor

The sum of the present values of all year's cash flows is the NPV

NPV is $2,925

jeff jeffy answered 4 months ago
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