# The following data concern an investment project: Investment in equipment $110,000 Annual cash...

## Question:

The following data concern an investment project:

Investment in equipment | $110,000 |

Annual cash inflows | $36,000 |

Required upgrade at end of year 2 | $14,000 |

Salvage value of the equipment | $10,000 |

Working capital required | $50,000 |

Life of the project | 4 years |

Required rate of return | 8% |

The working capital will be released for use elsewhere at the conclusion of the project.

Compute the project's net present value.

## Net Present Value:

To compute the net present value we subtract the cash outflows' present value from the cash inflows' present value. Any investment is feasible only if it has a positive net present value.

## Answer and Explanation: 1

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View this answer**Computation of net present value**

Year | PVF @ 8% | Amount | Present Value | |
---|---|---|---|---|

Cash Outflows |

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Chapter 5 / Lesson 20Learn about what net present value is, how it is calculated both for a lump sum and for a stream of income over multiple years. View some examples on NPV.

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