A five-year project has an initial fixed asset investment of $400,000, an initial NWC investment of...
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A five-year project has an initial fixed asset investment of $400,000, an initial NWC investment of $35,000, and an annual OCF of -$34,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 perce what is this project's equivalent annual cost, or EAC? Solution Time Initial investment ANWC OCF Total project cash flows or terminal cash flows 0 -400,000 -35,000 -435,000 a) Compute the NPV of all known CFs 1 -34,000 -34,000 2 -34,000 -34,000 3 -34,000 4 b) Find the PMT (-EAC) of an annuity with a PV of -542,154.5039, 5 years and an I/Y=10 -34,000 -34,000 -34,000 5 0 35,000 -34,000 1,000 A five-year project has an initial fixed asset investment of $400,000, an initial NWC investment of $35,000, and an annual OCF of -$34,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 perce what is this project's equivalent annual cost, or EAC? Solution Time Initial investment ANWC OCF Total project cash flows or terminal cash flows 0 -400,000 -35,000 -435,000 a) Compute the NPV of all known CFs 1 -34,000 -34,000 2 -34,000 -34,000 3 -34,000 4 b) Find the PMT (-EAC) of an annuity with a PV of -542,154.5039, 5 years and an I/Y=10 -34,000 -34,000 -34,000 5 0 35,000 -34,000 1,000
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a NPV 400000 35000 34000 34000 34000 34000 1000 1 0100 ... View the full answer
Related Book For
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Posted Date:
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