fm12 7 - Year Net Cash Flow PV @ 10% 0 ($89,000) ($89,000)...

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Answers and Solutions: 12 - 7 c. The additional end-of-project cash flow is $24,380: Salvage value $30,000 Tax on SV* (9,620) Return of NWC 4,000 $24,380 *Tax on SV = ($30,000 - $5,950)(0.4) = $9,620. Note that the remaining BV in Year 4 = $85,000(0.07) = $5,950. d. The project has an NPV of -$6,705. Thus, it should not be accepted.
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Unformatted text preview: Year Net Cash Flow PV @ 10% 0 ($89,000) ($89,000) 1 26,220 23,836 2 30,300 25,041 3 44,480 33,418 NPV = ($ 6,705 ) Alternatively, with a financial calculator, input the following: CF = -89000, CF 1 = 26220, CF 2 = 30300, CF 3 = 44480, and I = 10 to solve for NPV = -$6,703.83....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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