Question

Amazing Manufacturing, Inc., has been considering the purchase of a new manufacturing facility for $600,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value at that time. Operating revenues from the facility are expected to be $440,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 3 percent. Production costs at the end of the first year will be $285,000, in nominal terms, and they are expected to increase at 4 percent per year. The real discount rate is 6 percent. The corporate tax rate is 21 percent.

   Calculate the NPV of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:- $120399.10

Explanation:-

Following is the Excel worksheet showing the calculation of NPV of the project:-

Following is the Formula sheet of above excel worksheet for easy understanding of the calculations:-