Niwot Inc.is considering an investment that will generate $600,000 in cash inflows per year for 7 years and has $360,000 of cash outflows for the same period (before income taxes) .The cost of the asset is $420,000 and it will be depreciated using straight-line depreciation over the 7 year life.The asset has no salvage value.Niwot's tax rate is 30%.The cost of capital is 9%.
What is the net present value of this investment (rounded to the nearest dollar) ?
Definitions:
Average Annual Return
The compound annual growth rate of an investment over a specified period of time.
Fama and French
A multifactored model developed by Eugene Fama and Kenneth French to describe stock returns, incorporating market, size, and value factors among others.
Efficient-Market Hypothesis
A theory that suggests that financial markets fully absorb and reflect all available information, making it impossible to consistently achieve higher returns than the market average.
Small Investor
An individual investor who makes relatively small amounts of investments in the stock market or other financial markets, often with limited resources.
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