A project will produce an operating cash flow of $14,600 a year for 7 years.The initial fixed asset investment in the project will be $48,900.The net aftertax salvage value is estimated at $12,000 and will be received during the last year of the project's life.What is the net present value of the project if the required rate of return is 12 percent?
A)$22,627.54
B)$23,159.04
C)$34,627.54
D)$39,070.26
E)$41,040.83

Question

Quizplus · Accepted Answer

The net present value (NPV) of the project can be calculated using the formula for NPV, which involves discounting the future cash flows back to their present value at the given rate of return (12% in this case) and then subtracting the initial investment. The cash flows include the annual operating cash flow of $14,600 for 7 years and the net aftertax salvage value of $12,000 received in the last year. The correct NPV, based on these inputs, is $23,159.04.

A Project Will Produce an Operating Cash Flow of $14,600