Question

In: Finance

What is the NPV of a project that costs $10,000 today and another $10,000 in one...

What is the NPV of a project that costs $10,000 today and another $10,000 in one year, and is then expected to generate 8 annual cash inflows of $4,000 each starting at the end of year 5? Assume a cost of capital of 13% and an IRR of 6.17%.

Solutions

Expert Solution

Year Particulars Cash Flow PV Factor PV Of Cash Flow
a b=1/1.13^a c=a*b
0 Cost of project $   -10,000 1 $         -10,000.00
1 Cost of project -10000 0.88496 $           -8,849.56
5 Annual Cash Inflow 4000 0.54276 $             2,171.04
6 Annual Cash Inflow 4000 0.48032 $             1,921.27
7 Annual Cash Inflow 4000 0.42506 $             1,700.24
8 Annual Cash Inflow 4000 0.37616 $             1,504.64
9 Annual Cash Inflow 4000 0.33288 $             1,331.54
10 Annual Cash Inflow 4000 0.29459 $             1,178.35
11 Annual Cash Inflow 4000 0.26070 $             1,042.79
12 Annual Cash Inflow 4000 0.23071 $                 922.82
NPV $           -7,076.85

Related Solutions

What is the NPV of a project that costs $10,000 today and another $10,000 in one...
What is the NPV of a project that costs $10,000 today and another $10,000 in one year, and is then expected to generate 8 annual cash inflows of $4,000 each starting at the end of year 6? The expected return on the market is 9.4%, the risk-free rate is 2% and the project’s beta is 1.4.
What is the NPV of a project that costs $10,000 today and another $10,000 in one...
What is the NPV of a project that costs $10,000 today and another $10,000 in one year, and is then expected to generate 8 annual cash inflows of $4,000 each starting at the end of year 6? The expected return on the market is 9.4%, the risk-free rate is 2% and the project’s beta is 1.4
What is the NPV of a project that costs $13,000 today and another $6,000 in one...
What is the NPV of a project that costs $13,000 today and another $6,000 in one year, and is then expected to generate 11 annual cash inflows of $3,000 starting at the end of year 4. Cost of capital is 10%. Round to the nearest cent. ​[Hint: There are two outflows here, today and year 1. You will need to discount the year 1 cost at the project's discount rate when calculating PV(outflows).]
What is the NPV of a project that costs $13,000 today and another $7,000 in one...
What is the NPV of a project that costs $13,000 today and another $7,000 in one year, and is then expected to generate 11 annual cash inflows of $3,000 starting at the end of year 4. Cost of capital is 11%. Round to the nearest cent. ​[Hint: There are two outflows here, today and year 1. You will need to discount the year 1 cost at the project's discount rate when calculating PV(outflows).]
What is the NPV of a project that costs $120,000 today and is expected to generate...
What is the NPV of a project that costs $120,000 today and is expected to generate annual cash inflows of $10,000 for the next 12 years, followed by a final inflow of $21,000 in the year after. Use discount rate of 14%. Round to the nearest cent.  
What is the NPV of a project that costs $31,000 today and is expected to generate...
What is the NPV of a project that costs $31,000 today and is expected to generate annual cash inflows of $11,000 for the next 7 years, followed by a final inflow of $13,000 in year 8. Cost of capital is 8.7%. Round to the nearest cent.
What is the NPV of a project that costs $111,000 today and is expected to generate...
What is the NPV of a project that costs $111,000 today and is expected to generate annual cash inflows of $12,000 for the next 11 years. Cost of capital (discount rate) is 11%. Round to the nearest cent.
What is the NPV of a project that costs $38,000 today and is expected to generate...
What is the NPV of a project that costs $38,000 today and is expected to generate annual cash inflows of $9,000 for the next 7 years, followed by a final inflow of $15,000 in year 8. Cost of capital is 7.4%. Round to the nearest cent.
What is the NPV of a project that costs $80,000 today and cash inflows $45,000 annually...
What is the NPV of a project that costs $80,000 today and cash inflows $45,000 annually for three years from today if the opportunity cost of capital is 14?
There are two projects that the company is considering: Project A costs 10,000 to implement today,...
There are two projects that the company is considering: Project A costs 10,000 to implement today, and it brings subsequent cash flows of 5,900 at the end of year 1; 2,000 at the end of year 2; 5,000 at the end of year 3. Project B's initial cost is 7,500, and subsequent cash flows are 5,000 per year for 3 years. WACC is 8% for both projects. Calculate NPV and IRR for each project, and decide which to recommend.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT