A project has an initial cost of $480,000, projected revenue of $311,500, cash costs of $214,650,...
A project has an initial cost of $480,000, projected revenue of $311,500, cash costs of $214,650, an unlimited life, a tax rate of 21 percent, and a weighted average cost of capital of 13.8 percent. What is the net present value of the project?
Homework Answers
Net present value (NPV):
= Present value of cash inflows-Present value of cash outflows
= ($311,500-$214,650)×(1-21%)/13.8%-$480,000
= $554,431.16-$480,000
= $74,431.16
Hence, NPV is $74,431.16
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