Woolridge LP is considering investing in a project that will cost $100,000 and will generate $25,000 in cash flows for t...
Woolridge LP is considering investing in a project that will cost $100,000 and will generate $25,000 in cash flows for the next 5 years. Assuming a Discount Rate of 12%, which of the following is true?
Homework Answers
| Solution: | |||
| Statement showing Net present Value of the Project of Woolridge LP | |||
| Year | Cash Flows | PVF@12% | Present Value of Cash Flows |
| 0 | -100,000 | 1 | -100000 |
| 1 | 25000 | 0.893 | 22325 |
| 2 | 25000 | 0.797 | 19925 |
| 3 | 25000 | 0.712 | 17800 |
| 4 | 25000 | 0.636 | 15900 |
| 5 | 25000 | 0.567 | 14175 |
| Net Present Value | -9875 | ||
The Net Present value of cash flows from the project is - $9,875.
Since, the cash flows are negative, it is advisable to accept the project.
PS. The question you asked has missing information about the statement which is true. Please see if this answer helps.
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