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Below are the operating cash flows and net salvage value for a project Wagner Widgets is considering. Assume the cost of capital is 12%. Operating
Below are the operating cash flows and net salvage value for a project Wagner Widgets is considering. Assume the cost of capital is 12%.
Operating | Net Salvage | |
Year | Cash Flows | Value |
0 | ($15,000) | $10,000 |
1 | 8,800 | 7,900 |
2 | 7,230 | 4,500 |
3 | 8,000 | 0 |
a. Compute the NPV for the project.
b. Compute the NPV for the project if the company decides to abandon the project after the second year.
c. Compute the NPV for the project if the company decides to abandon the project after the first year.
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