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What is the net present value of the investment

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Reference no: EM132474237

Question - Forise Water Company drills small commercial water wells. The company is in the process of analyzing the purchase of a new drill. Information on the proposal is provided below.

Initial investment

Asset = $700,000

Working capital = $168,000

Operations (per year for four years)

Cash receipts = $550,000

Cash expenditures = $240,000

Disinvestment

Salvage value of drill (existing) = $150,000

Discount rate 16%

Required - What is the net present value of the investment? Assume there is no recovery of working capital.

a. $149,380

b. $310,000

c. -$168,000

d. $317,380

Reference no: EM132474237

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