Question

Blink of an Eye Company is evaluating a 5-year project that will provide cash flows of $34,500, $55,950, $62,210, $59,930, and $42,910, respectively. The project has an initial cost of $149,920 and the required return is 8 percent. What is the project's NPV?

Multiple Choice

• $52,631.02

• $19,316.83

• $21,352.92

• $26,773.94

• $17,560.75

Answer 1

Given about Blink of an Eye company's project,

Initial cost C0 = $149920

Cash flows are as follow:

CF1 = $34500

CF2 = $55950

CF3 = $62210

CF4 = $59930

CF5 = $42910

required rate of return r = 8%

So, NPV of a project is sum of PV of future cash flows minus initial cost,

NPV = CF1/(1+r) + CF2/(1+r)^2 + CF3/(1+r)^3 + CF4/(1+r)^4 + CF5/(1+r)^5 - C0

=> NPV = 34500/1.08 + 55950/1.08^2 + 62210/1.08^3 + 59930/1.08^4 + 42910/1.08^5 - 149920

=> NPV = 52631.02

Option A is correct.