Skyline Corp. will invest $130,000 in a project that will not begin to produce returns until the end of the 3rd year. From the end of the 3rd year until the end of the 12th year (10 periods), the annual cash flow will be $34,000. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Calculate the net present value if the cost of capital is 12 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
b. Should the project be undertaken?

Question

sanji5677 sanji5677

27-04-2020
Business

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Skyline Corp. will invest $130,000 in a project that will not begin to produce returns until the end of the 3rd year. From the end of the 3rd year until the end of the 12th year (10 periods), the annual cash flow will be $34,000. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Calculate the net present value if the cost of capital is 12 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
b. Should the project be undertaken?

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ewomazinoade ewomazinoade · Answer 1 · 2020-04-28T09:32:37+02:00

Answer:

NPV = $23,146.99

Explanation:

The net present value is the present value of after tax cash flows from an investment less the amount invested.

The NPV can be calculated using a financial calculator:

Cash flow in year o = $- 130,000

Cash flow each year in year 1 and 2 = 0

Cash flow each year in year 3 to 12 = $34,000

I = 12%

NPV = $23,146.99

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

tallinn tallinn · Answer 2 · 2022-03-31T16:27:09+02:00

When The net present value is the present value of after-tax cash flows if the cost of capital is 12 percent is NPV = $23,146.99

Calculation of Financial calculator

a.) When The net current value is the present value of after-tax cash flows from an investment less the amount invested.

Then The NPV can be calculated using a financial calculator:

Now, Cash flow in year o = $- 130,000

After that Cash flow each year in year 1 and 2 = 0

Then Cash flow each year in year 3 to 12 = $34,000

I is = 12%

Therefore, NPV = $23,146.99

b. To discover the NPV using a financial calculator:

1. Input the cash flow values by plowing the CF button. After inputting the value, press enters, and also the arrow faces a downward direction.

2. After that input all the cash flows, then press the NPV button, now input the value for I, press enter, and also then the arrow faces a downward direction.

3. Now Press compute

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