Wet and Wild Water Company drills small commercial water wells.The company is in the process of analyzing the purchase of a new drill.Information on the proposal is provided below.
Initial investment:
Asset $160,000
Working capital $ 32,000
Operations (per year for four years):
Cash receipts $160,000
Cash expenditures $ 88,000
Salvage value of new drill at the end of year 4 $ 16,000
Discount rate 20%
What is the net present value of the investment?Assume working capital will be recovered at end of year 4.
a.$(62,140)
b.$17,472
c.$42,362
d.$186,336