- A project has an initial cost of $70,400, expected net cash inflows of $14,000 per year for 12 years, and a cost of capital of 8%. What is the project’s NPV? (Hint: Begin by constructing a timeline.)
- A corporate expects to receive $35,420 each year for 15 years if a particular project is undertaken. There will be an initial investment of $105,492. The expenses associated with the project are expected to be $7,621 per year. Assume straight-line depreciation, a 15-year useful life, and no salvage value. Use a combined state and federal 48% marginal tax rate, MARR of 8%, to determine the project’s after-tax net present worth.
- An investment offers $400 per year forever, with the first payment occurring today. If the interest rate is 4.50% (per year, with annual interest compounding), the value of the entire investment today is $
- FED Lean has identified two mutually exclusive projects with the following cash flows.
| Year |
0 |
1 |
2 |
3 |
4 |
5 |
| Cash flow Project A |
-52,000.00 |
19,000.00 |
16,000.00 |
14,000.00 |
12,000.00 |
9,000.00 |
| Cash flow Project B |
-52,000.00 |
8,000.00 |
12,000.00 |
16,000.00 |
22,000.00 |
20,000.00 |
The company requires a
rate of return from projects of this risk. What is the NPV of Project A?
