Answer to Question #222258 in Finance for Sonu

Question #222258

) A project in Malaysia costs $10,000,000. Over the next 4 years, the project will generate

operating cash flows of $2700,000, $2700,000, $3420,000 and $3780,000 measured in

today’s dollars using a required rate of return of 15 percent. What is the break-even salvage

value of this project?


1
Expert's answer
2021-08-03T13:00:42-0400

Project cost = $10,000,000

Total operating cash flows = 2,700,000+2,700,000+3,420,000+3,780,000

= 12,600,000

No. of years = 4

Rate of return = 15%


Calculation:



Break−even salvage value =

(Total operating cash flows - Project cost) × (1 + Rate of return)^{No of years}


Break−even salvage value


Break−even salvage value = $4,547,416.25


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