Question:
Project marvel is a five-year project. The project has a total cash inflow of $350,000. The present value of such inflows is $275,000. The project requires an initial investment of $200,000 and additional working capital of $25,000. What is the net present value of the project?
A. $0
B. $50,000
C. ($50,000)
D. ($250,000)
Answer:
Project’s present value = Present value of cash inflows – Initial investment – Working capital
Present value of cash inflows = $275,000
Initial investment = $200,000
Working capital = $25,000
Project’s present value = $275,000 – $200,000 – $25,000
= $50,000
Answer: B. $50,000
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