Question

In: Finance

Rossdale Flowers has a new greenhouse project with an initial cost of $286,300 that is expected...

Rossdale Flowers has a new greenhouse project with an initial cost of $286,300 that is expected to generate cash flows of $47,900 for 7 years and a cash flow of $63,300 in Year 8. If the required return is 8.7 percent, what is the project's NPV?

  • $94,708.08

  • $67,994.70

  • −$18,200.22

  • −$10,299.17

  • $14,276.14

Solutions

Expert Solution

Ans −$10,299.17

Year Project Cash Flows (i) DF@ 8.7% DF@ 8.7% (ii) PV of Project A ( (i) * (ii) )
0 -286300 1 1                (2,86,300.00)
1 47900 1/((1+8.7%)^1) 0.920                     44,066.24
2 47900 1/((1+8.7%)^2) 0.846                     40,539.32
3 47900 1/((1+8.7%)^3) 0.779                     37,294.68
4 47900 1/((1+8.7%)^4) 0.716                     34,309.73
5 47900 1/((1+8.7%)^5) 0.659                     31,563.69
6 47900 1/((1+8.7%)^6) 0.606                     29,037.43
7 47900 1/((1+8.7%)^7) 0.558                     26,713.37
8 63300 1/((1+8.7%)^8) 0.513                     32,476.36
TOTAL                    (10,299.17)

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