A proposed project requires an initial cash outlay of $388,699 for equipment and an additional cash outlay of $51,864 in year 1 to cover operating costs. During years 2 through 4, the project will generate cash inflows of $500,000 a year. What is the net present value of this project at a discount rate of 9 percent? Round your answer to the nearest whole dollar.
Year | Project Cash Flows (i) | [email protected] 9% | [email protected] 9% (ii) | PV of Project ( (i) * (ii) ) |
0 | -388699 | 1 | 1 | (3,88,699.00) |
1 | -51864 | 1/((1+9%)^1) | 0.917431 | (47,581.65) |
2 | 500000 | 1/((1+9%)^2) | 0.841680 | 4,20,840.00 |
3 | 500000 | 1/((1+9%)^3) | 0.772183 | 3,86,091.74 |
4 | 500000 | 1/((1+9%)^3) | 0.708425 | 3,54,212.61 |
NPV | 7,24,863.69 | |||
NPV of Project B is 724864 |
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