Answer:
NPV = $1,564.65
Explanation:
The complete question is as follows:
Hawkins Poultry Farms is evaluating the investment in feeding equipment costing $139,000 which is anticipated to generate annual cash flows of roughly $36,000 for the next five years. At the end of this duration, the equipment should be sold for $40,000.
Determine the net present value of this investment option, considering Hawkins demands a 15 percent return on capital projects
Net present value represents the current worth of after-tax cash flows generated from an investment, minus the initial investment.
NPV can be determined using financial calculations
The cash flow at year 0 is noted as $-139,000
Annual cash flow from years 1 to 4 is $36,000
Cash flow for year 5 totals $36,000 plus $40,000, equaling $76,000.
i = 15%
NPV = $1,564.65
For calculating NPV with a financial calculator:
1. Enter the cash flow figures using the CF key. After entering the data, hit enter and press the down arrow.
2. Once all cash flows are entered, select the NPV button, insert the interest rate, press enter and then use the down arrow.
3. Finally press compute.
