Question
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M11-5 Calculating Net Present Value [LO 11-3] Citrus Company is considering a project that has estimated...
M11-5 Calculating Net Present Value [LO 11-3]
Citrus Company is considering a project that has estimated
annual net cash flows of $35,145 for eight years and is estimated
to cost $165,000. Citrus’s cost of capital is 6 percent.
Determine the net present value of the project. (Future Value of
$1, Present Value of $1, Future Value Annuity of $1, Present Value
Annuity of $1.) (Use appropriate factor(s) from the tables
provided. Negative amount should be indicated by a minus sign.
Round your final answer to 2 decimal places.)
Solutions
Expert Solution
| Calculation of net present value: | |||
| Time | PVF @6% | Amount | PV |
| - | 1.00 | -1,65,000.00 | -1,65,000.00 |
| 1.00 | 0.9434 | 35,145.00 | 33,155.66 |
| 2.00 | 0.8900 | 35,145.00 | 31,278.92 |
| 3.00 | 0.8396 | 35,145.00 | 29,508.42 |
| 4.00 | 0.7921 | 35,145.00 | 27,838.13 |
| 5.00 | 0.7473 | 35,145.00 | 26,262.39 |
| 6.00 | 0.7050 | 35,145.00 | 24,775.84 |
| 7.00 | 0.6651 | 35,145.00 | 23,373.43 |
| 8.00 | 0.6274 | 35,145.00 | 22,050.41 |
| 53,243.20 | |||
| Net present value is $53243.20 | |||
ekkarill92 answered 1 year agoRelated Solutions
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Annual cash inflow
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Expected life
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Present Value of an Annuity of $1 at
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Year
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10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
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Present Value of an Annuity of $1 at
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Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
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2.106
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Year Project A Project B
1 115,000 170,000
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(CF
0CF0)
negative 1 comma 143 comma 000−1,143,000
Year
(t)
Cash inflows
(CF Subscript
tCFt)
1
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2
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5
$311,000
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Using a cost of capital of 11%, calculate the net present value for the project shown...
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Year
(t)
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(CF Subscript tCFt)
in thousands
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2
$130
3
$189
4
$256
5
$312
6
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7
$280
8
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9
$42
10
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