Woodstock Inc.expects to own a building for five years,and then sell it for $1,500,000 net of taxes,sales commissions and other selling costs.Woodstock's cost of capital is 11%.How much will the sale of the building contribute to the NPV of the project?
A)$890,177
B)$1,351,351
C)$1,500,000
D)$2,527,587

Question

Quizplus · Accepted Answer

The contribution to NPV is the present value of the future sale price. The present value is calculated as $1,500,000 / (1 + 0.11)^5 = $890,177.