Good morning,

I would like to know if I have this correct. Some how I doubt myself with the deduction of the Initial cash outlay to get to net present value.

Diane Manufacturing Company is considering investing $500,000 in new equipment with an estimated useful life of 10 years and no salvage value. The equipment is expected to produce $320,000 in cash inflows and $200,000 in cash outflows annually. The company uses straight-line depreciation, and has a 30% tax rate. Diane Manufacturing desired rate of return on this project is 10%.

(Please enter answer with ONLY numbers - no punctuation, no$ signs, no decimals, no spacing. For negative answers only, enter the answer with "-" at the beginning. For example, -50000)

(ALT Exercise A from text publisher)

Calculate the Net Present Value:

Net cash flows for years 1 through 10 (99,000 X present value of $1 annuity factor)round to nearest dollar

99,000 x 6.14457 = 608,312

Recovery of investment in working capital (500,000 x (present value of $1 factor)

500,000 x 0.38554 = 192,770

Present Value of net cash flows

608,312 + 192,770 = 801,082

Initial cash outlay

(500,000)

Net Present Value

801,082 - 500,000 = 301,082