Question
In: Finance
Indigo River Packaging is considering a project that would last for 2 years and have a...
Indigo River Packaging is considering a project that would last for 2 years and have a cost of capital of 17.88 percent. The relevant level of net working capital for the project is expected to be 24,000 dollars immediately (at year 0); 26,000 dollars in 1 year; and 0 dollars in 2 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, and 2 are presented in the following table (in dollars). The tax rate is 50 percent. What is the net present value of this project?
|
Year 0 |
Year 1 |
Year 2 |
|
|
Revenue |
$0 |
167,000 |
167,000 |
|
Costs |
$0 |
64,000 |
64,000 |
|
Depreciation |
$0 |
40,000 |
40,000 |
|
Cash flows from capital spending |
-84,000 |
0 |
19,000 |
Solutions
Expert Solution
Compute the net present value, using MS-excel as shown below:
The result of the above excel table is as follows:
Hence, the net present value is $31,709.03102
jeff jeffy answered 1 year agoRelated Solutions
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