Question

In: Finance

You are evaluating a project which has a useful life of 5 years. However, you suspect...

You are evaluating a project which has a useful life of 5 years. However, you suspect that the project’s economic life might be different. The initial investment for the project is $5,000,000. The cash flows for the 5 years are $1.5 million, $1.7 million, $1.8 million, $2 million, and $2 million. The abandonment value of the project in each of the first 4 years is $4.2 million, $4 million, $3.5 million, and $2 million.  The abandonment value for the 5th year is incorporated into the cash flow given above. The required rate for this project is 15%. (use Excel)

What is the NPV of the project, assuming its useful life?

Determine the economic life for the asset

Solutions

Expert Solution

NPV for the Project assuming its useful life is 792,331.51 Dollars and Economic life for the asset is 3 Years since the Project has highest NPV in Year 3 assuming the given abandonment value.

jeff jeffy answered 2 years ago
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