A project that provides annual cash flows of $13,738 for eight years costs $84,486 today. What is the NPV for the project if the required return is 7 percent? (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar. (e.g., 32.16)
NPV(Net Present Value) is the sum of the cash outflows today and present values of the cash inflows in future
Cash Outflow = - $ 84486 (As cash moves out, hence negative sign)
Cash inflows = 13738 for 8 years
Hence present value of cash inflows will be equal to
in this i will take values from 1 to 8 as project is providing these cash flows for 8 years
Basically we are discounting the future cash flows at the required return to get te present values of cash flows
PV of cash flows = $ 82033.65
Therefore NPV = -84486 + 82033.65 = - $ 2452.35
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