Compute the net present value of a project

Reference no: EM1313501

A firm wishes to bid on a contract that is expected to yield the following after tax net cash flows at the end of each year-

Year 1: $5,000
Year 2: $8,000
Year 3: $9,000
Year 4: $8,000
Year 5: $8,000
Year 6: $5,000
Year 7: $3,000
Year 8: $-1,500

To secure the contract, the firm must spend $30,000 to retool its plant. This retooling will have no salvage value at the end of the 8 years. Comparable investment alternatives are available to the firm that earns 12% compounded annually. The depreciation tax benefit from the retooling is reflected in the net cash flows in the table.

Reference no: EM1313501

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