Respuesta :
The net present value of this expansion project at a required rate of return of 11.1 percent is $2312.1 from the given data.
What is cash flow?
The net amount of cash flow pouring into and going out of a business is referred to as cash flow. Millions of wasted and money gained reflect inflows and outflows, respectively.
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
NPV = $67,000 - 4,400 + $28,500(PVIFA 11%, 6) + 4,400/1.11^6
NPV = $67,000 - 4,400 + $28,500/ (4400/ 1.87)
= $67,000 - 4,400 + 12.1
= $2312.1
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The question is incomplete, the complete question will be:
Bruno's Lunch Counter is expanding and expects operating cash flows of $28,500 a year for 4 years as a result. This expansion requires $67,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $4,400 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 11 percent?
