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The Fitness Center is considering including a treadmill in this​ year's capital budget. The cash outlay...

The Fitness Center is considering including a treadmill in this​ year's capital budget. The cash outlay for the treadmill is $1,530.

The​ firm's cost of capital is 7.3%.

​After-tax cash​ flows, including​ depreciation, are as shown in the table below. Calculate the net present value​ (NPV) for this project.

End of Year

Cash Flow

1

$595

2

595

3

595

4

595

5

595

Solutions

Expert Solution

Ans NPV = $ 890.15

Year Project Cash Flows (i) DF@ 7.3% DF@ 7.3% (ii) PV of Project ( (i) * (ii) )
0 -1530 1 1                             (1,530.00)
1 595 1/((1+7.3%)^1) 0.931966                                   554.52
2 595 1/((1+7.3%)^2) 0.868561                                   516.79
3 595 1/((1+7.3%)^3) 0.809470                                   481.63
4 595 1/((1+7.3%)^4) 0.754399                                   448.87
5 595 1/((1+7.3%)^5) 0.703075                                   418.33
NPV                                   890.15

jeff jeffy answered 1 year ago
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