The following details are provided by Ferrous Foundry Company: Initial investment $5,000,000 Discount rate 15% Yearly...
The following details are provided by Ferrous Foundry Company:
|
Initial investment |
$5,000,000 |
|
Discount rate |
15% |
|
Yearly cash inflows |
|
|
1 |
$1,256,000 |
|
2 |
$1,360,000 |
|
3 |
$2,402,000 |
|
4 |
$1,158,000 |
PV of $1:
|
13% |
14% |
15% |
|
|
1 |
0.885 |
0.877 |
0.87 |
|
2 |
0.783 |
0.769 |
0.756 |
|
3 |
0.693 |
0.675 |
0.658 |
|
4 |
0.613 |
0.592 |
0.572 |
What is the NPV of the project?
A.
($594,486)
B.
$590,000
C.
$618,409
D.
($636,228)
Homework Answers
Answer:- ($636,228)
Explanation:-
| Year | Cash Inflows (a) | Present value factor @ 15% (b) | present value (PV) (a) × (b) |
| 1 | $1,256,000 | 0.87 | $1,092,720 |
| 2 | $1,360,000 | 0.756 | $1,028,160 |
| 3 | $2,402,000 | 0.658 | $1,580,516 |
| 4 | $1,158,000 | 0.572 | $662,376 |
| Present value of cash Inflows | $4,363,772 |
| Present value of cash Inflows | $4,363,772 |
| Less: Initial investment | ($5,000,000) |
| NPV | ($636,228) |
Add Answer to:
The following details are provided by Ferrous Foundry
Company:
Initial investment
$5,000,000
Discount rate
15%
Yearly...
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