# NPV

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.