Problem:
Bruno's Lunch Counter is expanding and expects operating cash flows of $26,000 a year for 4 years as a result. This expansion requires $39,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $3,000 of net working capital throughout the life of the project.
Required:
What is the net present value of this expansion project at a required rate of return of 16 percent?
- $18,477.29
- $21,033.33
- $28,288.70
- $29,416.08
- $32,409.57
Note: Provide support for your rationale.