The net cash investment of Project A is $9,200. Project A is expected to produce a net cash flow of $2,500 a year for the next five years. The salvage values of the project at the end of each year are estimated to be $7,000, $5,000, $4,000, $2,500 and $0 over the next five years. The firm's cost of capital is 10 percent.
(a) What is the net present value of Project A if the project is held until the end of its life?
(b) What is the optimal time to retire the project using NPV(n) shown in in Equation (13-1)?