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**Unformatted text preview: **Required: Compute the net present value of the project. Solution 1: Assuming salvage value of old equipment to be available now: Years Amount 11% factor PV Initial investment Now ($480,000) 1.000 ($480,000) Annual net cash receipts 1-7 $168,000 4.712 $791,616 Working capital invested now ($17,000) 1.000 ($17,000) Working capital released 7 $17,000 0.482 $8,194 Salvage value now $72,000 1.000 $72,000 NPV $374,810 Quiz Chapter 12 December 10, 2010 Name: ___________________________________ Solution 2: Assuming salvage value of proposed project will be available in 7 years Years Amount 11% factor PV Initial investment Now ($480,00 0) 1.000 ($480,00 0) Annual net cash receipts 1-7 $168,000 4.712 $791,616 Working capital invested now ($17,000) 1.000 ($17,000) Working capital released 7 $17,000 0.482 $8,194 Salvage value 7 $72,000 0.482 $34,704 NPV $337,514...

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