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Net Present Value Calculation

In: Business and Management

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Net Present Value and Decision Making:

From the following information on a project, calculate its net present value (NPV) after its 4-year useful life and state whether it is an acceptable project. Assume a required rate of return of 10% pa:

|End of year |0 |1 |2 |3 |4 |5 |
|Capital outlay |–30,000 |–15,000 | | | | |
|Cash inflows | | 15,000 |25,000 |20,000 |16,000 | |
|(operating) | | | | | | |
|Cash outflows | |-7,000 |-8,000 |-9,000 |-11,000 | |
|(operating) | | | | | | |
|Scrap | | | | | |6 000 |

Solution:

|End of year |0 |1 |2 |3 |4 |5 |
|Capital outlay |-30,000 |-15,000 | | | | |
|Cash inflows (operating) | |15,000 |25,000 |20,000 |16,000 | |
|Cash outflows | |-7,000 |-8,000 |-9,000 |-11,000 |…...

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