Question

Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this...

Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this project. Cost and cash flows are shown in the table. What is the NPV of the project? Year Project 0 ($11,368,000) 1 $ 2,112,590 2 $ 3,787,552 3 $ 3,275,650 4 $ 4,115,899 5 $ 4,556,424 Round to two decimal places.

Homework Answers

Answer #1

NPV is net present value of all future cashflows.

There is a standard formula for discounting future values into present values. Pls. refer below:

Lets take discount rate of 13.8%; All units in $

Year Cashflow Present value formula Present value formula with nos Present value
0 -11368000 - - -11368000
1 2,112,590 cash flow / (1+ discount rate)^n 2112590/(1+13.8%)^1 1856405.97
2 3,787,552 cash flow / (1+ discount rate)^n 3,787,552/(1+13.8%)^2 2924651.21
3 3,275,650 cash flow / (1+ discount rate)^n 3,275,650/(1+13.8%)^3 2222648.08
4 4,115,899 cash flow / (1+ discount rate)^n 4,115,899/(1+13.8%)^4 2454119.24
5 4,556,424 cash flow / (1+ discount rate)^n 4,556,424/(1+13.8%)^5 2387332.01

Sum of all present value is $ 477156.51

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