How do you calculate NPV for each project in question #6? Do I need to include the initial… 1 answer below »
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Time 0: $1,500,000 Land 3,000,000 Building and Equipment 500,000 Land Preparation $5,000,000 Total Time 1: $300,000 Working Capital Time 2: $150,000 Working Capital After-tax operating cash flow for each option (see next worksheet) For Motel Option: Sale Price = OCF11 / kA = $1,916,861 / .1355 = $14,146,576 Taxes on Sale: 14,146,576 Sale Price 1,500,000 Book Value of Land 4,000,000 Depreciated B.V. of Building / Equipment 8,646,576 Gain on Sale (assumes ordinary and capital gains 8,646,576 rates are the same) $2,939,836 Tax on Sale Termination Cash Flow: $14,146,576 Sale Price
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