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Home Depot has been presented with an investment opportunity that will yield end-of-year cash flows of...

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Finance

Home Depot has been presented with an investment opportunitythat will yield end-of-year cash flows of $45,000 per year in years1 through 4, $38,000 per years 5 through 9, and $42,000 in year 10.This investment will cost the firm $185,000 today, and the firm'scost of capital is 6%. What is the NPV for this investment? Pleaseinclude formula and numbers used.

Answer & Explanation Solved by verified expert
4.5 Ratings (966 Votes)

Ans $ 121172.63

Year Project Cash Flows (i) DF@ 6% DF@ 6% (ii) PV of Project ( (i) * (ii) )
0 -185000 1 1                (1,85,000.00)
1 45000 1/((1+6%)^1) 0.943                     42,452.83
2 45000 1/((1+6%)^2) 0.890                     40,049.84
3 45000 1/((1+6%)^3) 0.840                     37,782.87
4 45000 1/((1+6%)^4) 0.792                     35,644.21
5 38000 1/((1+6%)^5) 0.747                     28,395.81
6 38000 1/((1+6%)^6) 0.705                     26,788.50
7 38000 1/((1+6%)^7) 0.665                     25,272.17
8 38000 1/((1+6%)^8) 0.627                     23,841.67
9 38000 1/((1+6%)^9) 0.592                     22,492.14
10 42000 1/((1+6%)^10) 0.558                     23,452.58
PV                  1,21,172.63

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Transcribed Image Text

Home Depot has been presented with an investment opportunitythat will yield end-of-year cash flows of $45,000 per year in years1 through 4, $38,000 per years 5 through 9, and $42,000 in year 10.This investment will cost the firm $185,000 today, and the firm'scost of capital is 6%. What is the NPV for this investment? Pleaseinclude formula and numbers used.

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