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4. The management of Bronco Busters Boots Inc. is considering a project with a net initial...

4. The management of Bronco Busters Boots Inc. is considering a project with a net initial outlay of $60,000 and an annual net cash inflow estimated at $17,500 over the project's life of 5 years. The project has a cost of capital of 8 percent. What is the project's NPV?

Question 4 options: A) $53,821 B) $9,872 C) −$109 D) $19,891

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Expert Solution

Ans B) $9872

Year Project Cash Flows (i) DF@ 8% DF@ 8% (ii) PV of Project ( (i) * (ii) )
0 -60000 1 1                                (60,000)
1 17500 1/((1+8%)^1) 0.925926                                   16,204
2 17500 1/((1+8%)^2) 0.857339                                   15,003
3 17500 1/((1+8%)^3) 0.793832                                   13,892
4 17500 1/((1+8%)^4) 0.735030                                   12,863
5 17500 1/((1+8%)^5) 0.680583                                   11,910
NPV                                     9,872

jeff jeffy answered 1 year ago
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