NPV of project
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Year 0 Year 1 Year 2 Year 3 Year 4
Initial investment $16,000 --- --- --- ---
Sales revenue $7,500 $7,500 $7,500 $7,500
Operating costs 2,000 2,000 2,000 2,000
Depreciation 4,000 4,000 4,000 4,000
Net working capital 300 350 300 250 ?(200 not sure)
Cash flow from operations 1500 1500 1500 1500
NPV = -16,000+1500/1.12+1500/1.122+1500/1.123+1500/1.124
NPV of project if discount rate is 12 percent
Corporate tax rate is 34%. All sales revenue received in cash; all operating expenses and income taxes are paid in cash; all cash flows occur at end of year. All net working capital is recovered at the end of the project.
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YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR ...
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