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Hi Mr. Maffot,
Please I am having a hard time figuring this question out. Tried Annuity and Present value tables but I’m not getting the answer. Can you please explain the answer to me.
Able Ltd is considering a new project, the details of which are attached.
a) Calculate the Net Present Value of the project (to the nearest %).
Initial cost – $300,000
Expected life – 5 years
Estimated scrap value – $20,000
Addition revenue from the project – $120,000 per year
Incremental costs of the project • $30,000 per year
Cost of capital – 10%
The flows are as follows:
Time 0 (300,000)
1 to 5 90,000 per year. (120,000 – 30,000)
Does that help?