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The following information relates to questions 103 and 104. JCWCo is appraising an opportunity to invest in some new machinery that has the following cashflows. Initial investment $40,000 Net cashinflows for 5years in advance
$12,000 per year Decommissioning costs after 5years $15,000At a cost of capital of 10% what is the net present value of this project(to the nearest $100)?
The NPV i got is $3672 something the answer given in the kit is $700.What is the internal rate of return of the project, calculated using discount factors for 10% and15%(to the nearest whole%)
I got the wrong answer here
I have no idea which book you are using (I only have the BPP Revision Kit), and I am surprised that the answer in your book does not also show the workings.
The flows are:
0 (40,000)
0 12,000
1 – 4 12,000
5 (15,000)Maybe you were showing the 15,000 as an inflow whereas it is a cost and therefore an outflow.
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