Net present value: Franklin Mints, a confectioner, is looking to purchase a new jellybean-making machine at...

Net present value: Franklin Mints, a confectioner, is looking to purchase a new jellybean-making machine at a cost of $312,500. The company management projects that the cash flows from this investment will be $121,450 for the next seven years. If the appropriate discount rate is 14 percent, what is the NPV for the project? can you answer in excel format please

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Expert Solution

Net Present Value = Present value of cash Inflows - Present Value of cash outflows

Present Value of cash outflows = $312,500

Present value of cash Inflows = $121,450 * PVAF_{(14% , 7
years)}

Present value of cash Inflows = $121,450 * 4.2883

Present value of cash Inflows = $520,814.62

Net Present Value = $520,814.62 - $312,500

Net Present Value = $208,314.62

Year Cash Flow CF Present value Factor Present Value (1 + R)^n 14% 1.00 -3,12,500.00 Initial Investment 0 -3,12,500.00 Cash inflows Cash inflows Cash inflows Cash inflows Cash inflows Cash inflows Cash inflows 1 2 3 4 5 6 7 1,21,450.00 1,21,450.00 1,21,450.00 1,21,450.00 1,21,450.00 1,21,450.00 1,21,450.00 0.88 0.77 0.67 0.59 0.52 0.46 0.40 1,06,535.09 93,451.83 81,975.29 71,908.15 63,077.32 55,330.99 48,535.95 Net Presnt Value for the project = 2,08,314.62

jeff jeffy answered 2 hours ago

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