caclulate the NPV for the project that has an initial investment of $20,000 with expected after-tax...

caclulate the NPV for the project that has an initial investment of $20,000 with expected after-tax operating cash flows of $125,000 per year for each of the next 3 years. However, in preparation for its termination at the end of year 3, an additional investment of $350,000 must be made at the end of Year 2. What is the NPV? the cost of capital is 12%. Please show all calculations in excel!

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Expert Solution

NPV for the project is calculated as follows,

Net Present Value = Present value of Cash inflows - Present value of Cash outflows

Year	Cash flow	PV factor @12%	PV of cash flows
-	(20,000)	1.00	(20,000.00)
1	125,000	0.89	111,607.14
2	(225,000)	0.80	(179,368.62)
3	125,000	0.71	88,972.53
NPV @12%	1,211.05

Cash flows of 2 nd year = Cash inflows-Cash outflows

=125,000-350,000

=(225,000)

jeff jeffy answered 1 year ago

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