Answer:
NPV = $125,237.6
Explanation:
Net Present Value (NPV) : This is one of the techniques available to evaluate the feasibility of an investment project. The NPV of a project is the difference between the present value of the cash inflows and the cash outflows of the project.
Net Present Value of Model B14
Present Value (PV) of annual cash inflow = A× (1- (1+r)^(-n) )/r
A- annual cash inflow - 80,000, r-12%, n- 10
PV of cash inflow = 80,000× ((1- (1.012)^(-10))/0.12 = 452,017.84
PV of Scrap value = F× (1+r)^(-n)
= 10,000 × (1.12)^(-10)
= 3,219.73
NPV = 452,017.84+ 3,219.73 - 330,000 = 125,237.57
NPV = $125,237.6
Answer:
$125,238
Explanation:
Net present value is the Net value all cash inflows and outflows in present value term. All the cash flows are discounted using a required rate of return.
B14 Model F54 Model
Investment $330,000 $230,000
Useful life (years) 10 10
Estimated annual net cash inflows $80,000 $33,000
Residual value $10,000 $18,000
Required rate of return 12% 8%
B14 Model
First calculate Present value of each cash flow.
PV of Initial investment = $330,000
Present value of cash inflows = $80,000 x [ 1 - ( 1 + 12% )^-10 / 12% ] = $452,018
Present value of Residual value = $10,000 x ( 1 + 12% )^-10 = $3,220
Net present value = PV of Initial investment + Present value of cash inflows + Present value of Residual value
NPV = $(330,000) + $452,018 + $3,220 = $125,238
