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Bruno's Lunch counter is expanding and expects operating cash flows of $20,500 a year for 5...

Bruno's Lunch counter is expanding and expects operating cash flows of $20,500 a year for 5 years as a result. This expansion requires $54,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $4,800 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 13 percent?

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Ans $ 15908.49

Year Project Cash Flows (i) DF@ 13% DF@ 13% (ii) PV of Project ( (i) * (ii) )
0 -58800 1 1                    (58,800.00)
1 20500 1/((1+13%)^1) 0.885                     18,141.59
2 20500 1/((1+13%)^2) 0.783                     16,054.51
3 20500 1/((1+13%)^3) 0.693                     14,207.53
4 20500 1/((1+13%)^4) 0.613                     12,573.03
5 20500 1/((1+13%)^5) 0.543                     11,126.58
5 4800 1/((1+13%)^5) 0.543                       2,605.25
NPV                     15,908.49

jeff jeffy answered 3 weeks ago
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