Question
A company has provided the following data concerning a proposed investment project: Initial investment $500,000 Life of the project (in years) 5 Working capital required
A company has provided the following data concerning a proposed investment project:
| Initial investment | $500,000 |
| Life of the project (in years) | 5 |
| Working capital required | $30,000 |
| Annual net cash inflows | $120,000 |
| Salvage value | $150,000 |
The company uses a discount rate of 11%. The working capital would be released at the end of the project.
| Present Value of $1, Period 1 at 11% | 0.901 |
| Present Value of $1, Period 2 at 11% | 0.812 |
| Present Value of $1, Period 3 at 11% | 0.731 |
| Present Value of $1, Period 4 at 11% | 0.659 |
| Present Value of $1, Period 5 at 11% | 0.593 |
| Present Value of an ordinary annuity of $1, period 1 at 11% | 0.901 |
| Present Value of an ordinary annuity of $1, period 2 at 11% | 1.713 |
| Present Value of an ordinary annuity of $1, period 3 at 11% | 2.444 |
| Present Value of an ordinary annuity of $1, period 4 at 11% | 3.102 |
| Present Value of an ordinary annuity of $1, period 5 at 11% | 3.696 |
Compute the net present value of the project.
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