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A project has an initial cash outflow of $42,600 and produces cash inflows of $17,680, $19,920,...

A project has an initial cash outflow of $42,600 and produces cash inflows of $17,680, $19,920, and $15,670 for Years 1 through 3, respectively. What is the NPV at a discount rate of 12 percent? Select one:

A. $186.95

B. –$108.19

C. $219.41

D. $229.09

E. $311.16

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Answer #1

Given about cash flow for a project.

Initial investment C0 = $42600

Cash flow in year 1 CF1 = $17680

Cash flow in year 2 CF2 = $19920

Cash flow in year 3 CF3 = $15670

discount rate d = 12%

NPV of a project is sum of Present value of its future cash flows minus initial investment. So, Net Present value of cash flows is calculated using formula

NPV = -C0 + CF1/(1+d) + CF2/(1+d)^2+ CF3/(1+d)^3

=> NPV = -42600 + 17680/1.12 + 19920/1.12^2 + 15670/1.12^3 = $219.41

Option C is correct.

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