What is the NPV of a project if the present value of all costs is $174,250 th epresent value of all cash flows is $4,183,240.10, the present value of all tax shields is $15,343.23 and the NPV of all salvage values is $5,533.23? a) $819.90 b) $18,800.10 c) $24,333.33 d) $29,866.56 I am thinking that the cash flows figure is a typo and should read $183,240.10

I concur…

183240.10 -174250 + 15343.23 - 5533.23 = 18800. Yep, agree with you.

thanks much

cpk123 Wrote: ------------------------------------------------------- > 183240.10 -174250 + 15343.23 - 5533.23 = 18800. > > Yep, agree with you. cpk y did you subtract the salvage NPV here? Can you please explain?

I thought It should have been 183240.10 -174250 - 15343.23 + 5533.23 Could somebody explain? - Dinesh S

Shouldn’t the tax shield increase the NPV of the project too? D) = $29,866.56 = $183,240.10 - $174,250 + $15,343.23 + $5,533.23

I’m agreeing with ‘D’ as the answer, also. ‘Salvage Value’ is the value of an asset, not an expense.

my mistake… I just realized - this is exactly what we do in calculating the PV (Lease Obligation). PMT = Lease Payment, FV=Salvage Value Calculate the PV…

I was thinking C? 183240.1 - 174250 + 15343.23. I am not clear why the Salvage value would be added since presumably it is included in the expected future cash flows?

I get C Salvage should be included in the future cash flows already.

sv102307, mkgref, I agree, good catch. “all cash flows” should include the terminal cash flow, which should include the salvage value. Sneaky question, typos aside.

livelylatin could you tell the answer to this and your other threads…it kind of feels incomplete without the official answer.

I don’t know the official answer myself. It seems like the answer is still not very clear is it c or D.