You are considering an investment opportunity with the following costs and benefits. The applicable interest rate for this investment opportunity is 12% (effective annual rate). Calculate the NPV of this investment opportunity. Round your answer to two decimals (do not include the $-sign in your answer).
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|---|
| Costs | $ (10,000) | $ (5,000) | $ (1,000) | $ (1,000) | $ (1,000) | $ (1,000) | $ (1,000) |
| Benefits | $ - | $ - | $ 5,000 | $ 7,500 | $ 7,500 | $ 5,000 | $ 1,000 |
| Calculation of NPV of the Investment Opportunity | |||||
| Year | Benefits | Costs | Net Cash Flow | Discount Factor @12% | Discounted Cash Flows |
| A | B | C | D = B-C | E = 1/(1+12%)^A | F = D*E |
| 0 | 0 | 10000 | -10000 | 1 | -10000 |
| 1 | 0 | 5000 | -5000 | 0.892857143 | -4464.285714 |
| 2 | 5000 | 1000 | 4000 | 0.797193878 | 3188.77551 |
| 3 | 7500 | 1000 | 6500 | 0.711780248 | 4626.571611 |
| 4 | 7500 | 1000 | 6500 | 0.635518078 | 4130.86751 |
| 5 | 5000 | 1000 | 4000 | 0.567426856 | 2269.707423 |
| 6 | 1000 | 1000 | 0 | 0.506631121 | 0 |
| Net Present Value | -248.3636608 | ||||
| Therefore, NPV of the investment opportunity is -$248.36 |
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