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Aberdeen Outboard Motors is contemplating building a new plant. The company anticipates that the plant will...
Aberdeen Outboard Motors is contemplating building a new plant. The company anticipates that the plant will require an initial investment of
$2.06 million in net working capital today. The plant will last 11 years, at which point the full investment in net working capital will be recovered. Given an annual discount rate of 6.4%, what is the net present value of this working capital investment?
The NPV is $_____ (Round to the nearest dollar.)
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Expert Solution
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
| Investment in working capital | $ -2.06 | |||||||||||
| Recovery of working capital | $ 2.06 | |||||||||||
| Cash Flow | $ -2.06 | $ - | $ - | $ - | $ - | $ - | $ - | $ - | $ - | $ - | $ - | $ 2.06 |
| Discount Rate | 6.40% | |||||||||||
| NPV | $ -1.02 |
The NPV is $ -1.00 (Rounding to the nearest dollar)
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