Solution:
Initial Outlay
(400,000)
Annual Cashflows
100,000
Cost of Capital
14%
Expected Years
8
Net Present Value
$63,886.39
A new machine costs 400,000.Itgeneratesanafter−taxinflowof100,000 for 8 years with the opportunity cost being 14%. The income each year has to be discounted at a rate equal to the opportunity cost and added for all the eight years.
The net present value = net inflow-net outflow
Net outflow = 100000Netinflow=(100,000/1.14)+(100,000/1.142)+(100,000/1.143)+(100,000/1.144)+(100,000/1.145)+(100,000/1.146)+(100,000/1.147)+(100,000/1.148) 463,886
NPV = 463,886−400,000 = 63,886Thenetpresentvalueisapproximately63,886
No comments:
Post a Comment