"Party Sea" is considering a new business idea: buying and then renting out sailing catamarans to...

"Party Sea" is considering a new business idea: buying and then renting out sailing catamarans to rich customers. The company estimates that it will cost $32,000,000 to buy brand-new sailing catamarans. The estimated operating cash flow will equal $4,000,000 per year. At the end of Year 3 this catamaran project will be over, at which time all used catamarans will be sold at the after-tax salvage value of $10,000,000. The company also plans to immediately set aside $58,000 in cash which will be increased by $5,000 each year and recovered at the end of the project. Calculate the Net Present Value of the project if the appropriate discount rate is 11%. Increase decimal places for any intermediate calculations, from the default 2 to 6 or higher. Only round your final answer to whole dollar.

Solutions

Expert Solution

NPV of the project= -$14,930,069 (negative)

Calculation as below:

Amanda K answered 2 years ago

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