Cullumber Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The...

Cullumber Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $1,904,338, have a life of five years, and would produce the cash flows shown in the following table.

Year	Cash Flow
1	$497,372
2	-227,300
3	936,920
4	829,420
5	672,480

What is the NPV if the discount rate is 13 percent? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.)

Solutions

Expert Solution

Solution:-

Calculation of Net Present value (NPV)

Year	Cash Flows	PV @13%	Present value
1	497,372.00	0.8850	440,174.22
2	-227,300.00	0.7831	-177,998.63
3	936,920.00	0.6930	649,285.56
4	829,420.00	0.6133	508,683.29
5	672,480.00	0.5427	364,954.90
Present value of Cash Inflows	1,785,099.33
Less: Present value of Cash outflows	1,904,338.00
Net Present Value	-119,238.67

Net Present value = -119,238 (Rounding off)

jeff jeffy answered 1 year ago

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