Byerly Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project.The net present value of the project is closest to:

A) $(151,658)
B) $(105,847)
C) $11,000
D) $(44,847)

Question

Byerly Corporation has provided the following data concerning an investment project that it is considering:

The working capital would be released for use elsewhere at the end of the project.The net present value of the project is closest to:

A) $(151,658)
B) $(105,847)
C) $11,000
D) $(44,847)

Madelin Recker · Accepted Answer

Final Answer : B, Explanation :  To calculate the net present value of the project, we first need to calculate the present value of the cash inflows and outflows. The cash inflows are the after-tax proceeds from the sale of the old equipment, the annual cash inflows from the new equipment, and the after-tax proceeds from the sale of the new equipment at the end of the project. The cash outflows are the initial investment, the annual operating costs, and the working capital.Using a discount rate of 12%, we find that the present value of the cash inflows is $716,826 and the present value of the cash outflows is $822,673. Subtracting the cash outflows from the cash inflows, we get a net present value of $(105,847). Therefore, the best choice is B.

Byerly Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project.The net present value of the project is closest to:

A) $(151,658)
B) $(105,847)
C) $11,000
D) $(44,847)

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Related questions

Byerly Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project.The net present value of the project is closest to:A) $(151,658) B) $(105,847) C) $11,000D) $(44,847)

Definitions

Learning Objectives

Learning Objectives

Related questions

Byerly Corporation has provided the following data concerning an investment project that it is considering: The working capital would be released for use elsewhere at the end of the project.The net present value of the project is closest to:

A) $(151,658)
B) $(105,847)
C) $11,000
D) $(44,847)