Question
Forise Water Company drills small commercial water wells. The company is in the process of analyzing the purchase of a new drill. Information on the
Forise Water Company drills small commercial water wells. The company is in the process of analyzing the purchase of a new drill. Information on the proposal is provided below.
Initial investment
Asset = $700,000
Working capital = $ 168,000
Operations (per year for four years)
Cash receipts = $550,000
Cash expenditures = $ 240,000
Disinvestment
Salvage value of drill (existing) = $150,000
Discount rate 16%
What is the net present value of the investment? Assume there is no recovery of working capital?
Step by Step Solution
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To calculate the net present value NPV of the investment we need to discount the cash flows using th...
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Applied Statistics In Business And Economics
Authors: David Doane, Lori Seward
4th Edition
73521485, 978-0073521480
