In: Finance
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?
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 |