(Ignore income taxes in this problem.) The following data concern an investment project:?Investment in equipment$180,000?Annual net cash inflows$42,000?Salvage value of the equipment$70,000?Working capital required$20,000?Life of the project5 years?Required rate of return12%The working capital will be released for use elsewhere at the conclusion of the project.Required:Compute the project's net present value.
What will be an ideal response?
| ? | ? | ? | Year | |
| ? | ? | Now | 1-5 | 5 |
| ? | Initial investment | $(180,000) | ? | ? |
| ? | Working capital | $(20,000) | ? | $20,000 |
| ? | Annual net cash flow | ? | $42,000 | ? |
| ? | Salvage value | ? | ? | $70,000 |
| ? | Total cash flows (a) | $(200,000) | $42,000 | $90,000 |
| ? | Discount factor (12%) (b) | 1.000 | 3.605 | 0.567 |
| ? | Present value of cash flows (a) × (b) | $(200,000) | $151,410 | $51,030 |
| ? | Net present value | $2,440 | ? | ? |
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