Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping's cost of capital is 8.04 percent. What is the NPV of a project if the initial costs are $1,915,222 and the project life is estimated as 10 years? The project will produce the same after-tax cash inflows of $698,670 per year at the end of the year. Round the answer to two decimal places.
Green Landscaping, Inc. is using
Round the answer to two decimal places.
Expert Answer
Given information is:
Initial investment = $19,15,222
Project life = 10 years
Annual
Cost of capital = 8.04%
Net present value of project = Present value of cash inflows - Initial investment
I don't understand how this answer is derived (in bold). Present value of cash inflows = (Annual cash inflows * Present value factor @8.04% for 10 years)
= 698670 * 6.6979
= $46,79,621.79
Net present value of project = 46,79,621.79 - 1915222
= $27,64,399.79
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