ABC Company is considering purchasing a truck The cash outla

ABC Company is considering purchasing a truck. The cash outlay for the truck is $18,000 and will have net cash inflows of $5,100 for each of the next five years. The firm s WACC is 12%, what is the NPV for the truck? Select one: a. $408.71 b. ($375.71) C. $508.71 d. $384.36

Solution

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$5100[1-(1.12)^-5]/0.12

=$5100*3.604776202

=$18384.36

NPV=Present value of inflows-Present value of outflows

=$18384.36-$18000

=$384.36(Approx).