question archive Holiday Express is considering a 5-year project with an initial cost of $87,000

Holiday Express is considering a 5-year project with an initial cost of $87,000

Subject:FinancePrice:2.87 Bought7

Holiday Express is considering a 5-year project with an initial cost of $87,000. The project will produce cash inflows of $24,800 a year over the life of the project. What is the net present value if the required rate of return is 14.2 percent?

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Answer:

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=24800[1-(1.142)^-5]/0.142

=24800*3.416643103

=84732.75

NPV=Present value of inflows-Present value of outflows

=84732.75-$87000

=($2267.25)(Approx)(Negative).