To the nearest dollar, what is the net present value of a replacement project whose cash...
To the nearest dollar, what is the net present value of a replacement project whose cash flows are -$104,000; $30,000; $69,000; and $55,000 for years 0 through 3, respectively? The firm has decided to assume that the appropriate cost of capital is 10%.
Homework Answers
| Project A | ||||
| Discount rate | 0.1 | |||
| Year | 0 | 1 | 2 | 3 |
| Cash flow stream | -104000 | 30000 | 69000 | 55000 |
| Discounting factor | 1 | 1.1 | 1.21 | 1.331 |
| Discounted cash flows project | -104000 | 27272.73 | 57024.79 | 41322.31 |
| NPV = Sum of discounted cash flows | ||||
| NPV Project A = | 21619.83 | |||
| Where | ||||
| Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||
| Discounted Cashflow= | Cash flow stream/discounting factor | |||
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