A project manager believes a new venture will generate operating cash flows of $55,000 per year...

 

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A project manager believes a new venture will generate operating cash flows of $55,000 per year for four years. The project necessitates a $5,000 initial investment in net working capital, which will be recovered in full when the project concludes. It also requires a $100,000 investment in fixed assets that will be depreciated to a $0 book value over the project's life. The assets will have a pre- tax salvage value of $20,000 at the end of the fourth year. What is the net present value (NPV) of this investment if the required rate of return is 14% and the tax rate is 21%? A project manager believes a new venture will generate operating cash flows of $55,000 per year for four years. The project necessitates a $5,000 initial investment in net working capital, which will be recovered in full when the project concludes. It also requires a $100,000 investment in fixed assets that will be depreciated to a $0 book value over the project's life. The assets will have a pre- tax salvage value of $20,000 at the end of the fourth year. What is the net present value (NPV) of this investment if the required rate of return is 14% and the tax rate is 21%?

Answer rating: 100% (QA)

To calculate the net present value NPV of this investment we need to discount the cash flows at the ... View the full answer