Answer:
NPV = (53,222.44)
Explanation:
Net fixed asset 345,000
Working capital
160,000 inventory + 35,000 Ar = 195,000
short term deb (110,000)
net working capital 85,000
Total investment 430,000
salvage value 345,00 x 25% = 86,250
release of the working capital 85,000
Cash flow at end of project 171,250
annual cash flow
sales 550,000
cost (430,000)
depreciation 69,000
EBT 51,000
tax expense 35%
(17,850)
net income 33,150
+ dep 69,000
cash flow 102,150
Now we calculate the present value of the net cash flow and the present alue fothe end of the project
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 102150
time 4
rate 0.15
[tex]102150 \times \frac{1-(1+0.15)^{-4} }{0.15} = PV\\[/tex]
PV $291,636.04
[tex]\frac{Principal}{(1 + rate)^{time} } = PV[/tex]
Principla (sum of salvage and released Working capital 171,250.00
time 5.00
rate 0.15
[tex]\frac{171250}{(1 + 0.15)^{5} } = PV[/tex]
PV 85,141.52
NPV = 291,636.04 + 85,141.52 - 430,000 = (53,222.44)