The Following Data Concern an Investment Project The Working Capital Will Be Released for Use Elsewhere at r

question 136

Essay

The following data concern an investment project:

$\begin{array} { l r } \text { Investment in Equipment } & \$ 16,000 \\\text { Net Annual Cash Inflows } & \$ 3,600 \\\text { Working Capital Required } & \$ 4,500 \\\text { Salvage Value of the Equipment } & \$ 2,000 \\\text { Life of the Project } & 12 \text { years } \\\text { Discount Rate } & 14 \%\end{array}$

The working capital will be released for use elsewhere at the conclusion of the project. (Ignore income taxes in this problem.)

Required:

Calculate the project's net present value.

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Definitions:

Acid-Test Ratio

A financial metric comparing a company's most liquid assets (excluding inventory) to its current liabilities, used to assess short-term solvency.

Marketable Securities

These are liquid financial instruments that can easily be converted into cash at their current value in the financial markets.

Selling And Administrative Expenses

Expenses related to the selling of products and the management of the business, not directly tied to manufacturing.

Noncurrent Assets

Noncurrent assets are long-term assets not expected to be converted into cash or used up within one year, such as property, plant, and equipment.