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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