Capital Budgeting

Based on these cash flows, the NPV of the Bauer Industries plant to construct lightweight trucks will be the summation of the present values of all the cash flows from year 1 to year 10 discounted back appropriately by the Cost of Capital 12 minus the Capital Expenditure made in the Year 0. As the capital expenditure is marked in negative, the NPV is computed by adding the Capital Expenditure to the summation of the PVs of the ten cash flows (Johnson, n.d.).