Generate net cash inflows of 20000 per year in each of the


Apnea Video Rental Store is considering the purchase of an almost new minivan to deliver and pick up video tapes from customers. The minivan will cost $45,000 and is expected to last 8 years. However, the minivan's engine will need to be overhauled at a cost of $4,000 at the end of year 3. In addition, purchasing the minivan would require an immediate investment of $20,000 in working capital which would be released for investment elsewhere at the end of the 8 years. The minivan is expected to have a $10,000 salvage value at the end of 8 years. This delivery service is expected to generate net cash inflows of $20,000 per year in each of the 8 years. Apnea's cost of capital is 15%.

Calculate the net present value (NPV) of this investment opportunity. Do not use decimals in your answer.

Solution Preview :

Prepared by a verified Expert
Accounting Basics: Generate net cash inflows of 20000 per year in each of the
Reference No:- TGS02577779

Now Priced at $10 (50% Discount)

Recommended (97%)

Rated (4.9/5)