Kurt sullivan is considering a project. He decides to use the NPV method to determine if the
Question:
Kurt sullivan is considering a project. He decides to use the NPV method to determine if the project is good or not. He determines that he appropriate discount rate is 11%. The project involves an initial investment of $500,000. Net cash inflows from business operations are $45,000 for the first year and then $85,000/yr for years 2 to 10 when the project is terminated. Assume that the cash flow from business operations for a particular year occurs at the end of the year. E.g. The cash flow for the third year is $85,000. Assume that it occurs at t=3. At t=5 major repairs costing $34,000 will occur. When the project end in 10 years, the old equipment will be salvaged for $63,000. Determine the NPV
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen