Blue Eagle Food is considering a project that would last for 3 years and have a cost of capital of 18.42 percent. The relevant level of net working capital for the project is expected to be 24,000 dollars immediately (at year 0); 8,000 dollars in 1 year; 35,000 dollars in 2 years; and 0 dollars in 3 years. Relevant expected operating cash flows and cash flows from capital spending in years 0, 1, 2, and 3 are presented in the following table. What is the net present value of this project? Operating cash flows (in dollars) Cash flows from capital spending (in dollars) Number Time 0 0 -189,000 Year 1 63,000 0 Year 2 71,000 0 Year 3 56,000 18,000

Net present value is the most important concept of finance. It is used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. The difference between the present value of cash inflow and cash outflow is…

The term investment refers to allocating money with the intention of getting positive returns in the future period. For example, an asset would be acquired with the motive of generating income by selling the asset when there is a price increase.

Capital investment analysis is a way of the budgeting process that companies and the government use to evaluate the profitability of the investment that has been done for the long term. This can include the evaluation of fixed assets such as machinery, e…

Capital budgeting is a decision-making process whereby long-term investments is evaluated and selected based on whether such investment is worth pursuing in future or not. It plays an important role in financial decision-making as it impacts the profitab…