# Question & Answer: Mattice Corporation is considering investing \$825,000 in a project. The life of the project would be 10 years. The project wo…..

Mattice Corporation is considering investing \$825,000 in a project. The life of the project would be 10 years. The project would require additional working capital of \$22,000, which would be released for use elsewhere at the end of the project. The annual net cash inflows would be \$154,000. The salvage value of the assets used in the project would be \$32,000. The company uses a discount rate of 15%. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using the tables provided.

Required:

Compute the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Initial Investment = \$825,000
Life of Project = 10 years
Annual Cash Inflow = \$154,000
Salvage Value = \$32,000
Discount rate = 15%

Net Present Value = – Initial Investment – Additional NWC required + PV of Annual Cash Inflows + PV of Salvage Value + PV of NWC recovered
Net Present Value = -\$825,000 – \$22,000 + \$154,000 * PV Annuity of \$1 (15%, 10) + \$32,000 * PV of \$1 (15%, 10) + \$22,000 * PV of \$1 (15%, 10)
Net Present Value = -\$825,000 – \$22,000 + \$154,000 * 5.0188 + \$32,000 * 0.2472 + \$22,000 * 0.2472
Net Present Value = -\$60,756