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Initial cost $300,000
Expected life 5 years
Est. 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%calculate the NPV of the project.
initial outlay is -$300000
Additional net revenue is $120000-$30000=$90000
annuity value for 5 years at ten per cent =3.791
$90000×3.791=$341190
scrap value
$20000×0.621=$12420
net present value is -$300000+$341190+$12420
=$53610 is the net present value based on tables I used on ACCA website.If you have any questions about above or anything else don’t hesitate to ask.
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