Question

Project L costs $65,000, its expected cash inflows are $12,000 per year for 10 years, and its WACC is 11%. What is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

Answer 1

The NPV is computed as shown below:

= Initial investment + Present value of future cash flows

Present value is computed as follows:

= Future value / (1 + r)ⁿ

So, the NPV will be as follows:

= - $ 65,000 + $ 12,000 / 1.11¹ + $ 12,000 / 1.11² + $ 12,000 / 1.11³ + $ 12,000 / 1.11⁴ + $ 12,000 / 1.11⁵ + $ 12,000 / 1.11⁶ + $ 12,000 / 1.11⁷ + $ 12,000 / 1.11⁸ + $ 12,000 / 1.11⁹ + $ 12,000 / 1.11¹⁰

= $ 5,670.78 Approximately

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