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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 2 years ago
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