5) The Blueberry Company is considering a project which will cost $424 initially. The project will...

5) The Blueberry Company is considering a project which will cost $424 initially. The project will not produce any cash flows for the first 3 years. Starting in year 4, the project will produce cash inflows of $454 a year for 5 years. This project is risky, so the firm has assigned it a discount rate of 15.4 percent. What is the net present value?

Expert Solution

	Computation of net present value
	i	ii	iii	iv=ii*iii
	year	Cash flow	PVIF @ 15.4%	present value
	0	-424	1.0000	(424.00)
	1	0	0.8666	-
	2	0	0.7509	-
	3	0	0.6507	-
	4	454	0.5639	256.00
	5	454	0.4886	221.83
	6	454	0.4234	192.23
	7	454	0.3669	166.58
	8	454	0.3179	144.35
				556.98

Therefore NPV =		556.98

jeff jeffy answered 2 years ago

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