Hi,
Intial Investment = 14000 ; PV of additional space = 7400* 12.783 = 94594.2 ; PV of income = 13000*12.783 = 166179
NPV = 166179 - (14000+94594.2 ) =57584.8
Since options aren't given, not sure whether my solution is right.
Please correct me if I'm wrong.------------------------------
Sanjana
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Original Message:
Sent: 11-25-2020 11:46 AM
From: Nasira Hameduddin
Subject: Help with question
Wen Seng operates an ice cream shop. He is trying to decide whether to expand his business to include ice cream cakes. He will need some additional space that will cost him $7,400 per year at the end of each year and some additional equipment that will cost $14,000 up front. The ice cream cakes will provide an extra income of $13,000 per year at the end of each year. The business is expected to last 25 years. The discount rate (or interest rate) for Wen Seng's new business is 6%. What is the Net Present Value of the ice cream cake project? (Assume there are no taxes.)
HELP!!!!