Explore BrainMass
Share

Minimum cash flow and opportunity cost if capital

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

What is the minimum cash flow that could be received at the end of year three to make the following project "acceptable?" Initial cost = $100,000; cash flows at end of years one and two = $35,000; opportunity cost of capital = 10%.

© BrainMass Inc. brainmass.com October 25, 2018, 1:01 am ad1c9bdddf
https://brainmass.com/business/finance/finance-249494

Solution Preview

The project is acceptable when its NPV is >= 0

NPV = sum of cash flows for each ...

Solution Summary

Minimum cash flow and opportunity cost of capital for a project is examined.

$2.19
See Also This Related BrainMass Solution

Basic finance problems

1) Define the following terms:
a) Sunk Cost
b) Opportunity cost
c) Allocated cost

2) Is the following statement true or false. If the statement is true, where or how are these costs reflected?
"Financing costs should be ignored when estimating a project's relevant cash flows."

3) List and discuss items included in a project's initial cash outflow.

4) List and discuss items included in a project's terminal cash flow.

5) Williams Company is evaluating a project requiring a capital expenditure of $400,000. The project has an estimated life of 4 years and no salvage value. The estimated net income and net cash flow from the project are as follows:

Year Net Income Net Cash Flow
1 $ 90,000 $ 250,000
2 80,000 200,000
3 40,000 100,000
4 30,000 100,000
$240,000 $650,000

The company's minimum desired rate of return for net present value analysis is 10%.

Calculate the Net Present Value of the project. Should the company go forward?

View Full Posting Details