Question

Calculate the NPV of the project based on the information below: Initial investment: $20,000 Cash flow...

Calculate the NPV of the project based on the information below:

Initial investment: $20,000

Cash flow generated each year: $5,000

Total period: 5

Years Discount rate: 6%

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Homework Answers

Answer #1

Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:

  • Press the CF button.
  • CF0= -$20,000. Indicate the initial cash flow by a negative sign since it is a cash outflow.  
  • Cash flow for each year should be entered.
  • Press Enter and down arrow after inputting each cash flow.
  • After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 6%.
  • Press enter after that. Press the down arrow and CPT buttons to get the net present value.  

Net present value at 6% discount rate is $1,061.82.

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