Question

A project has an initial cost of $36,400, expected net cash inflows of $15,000 per year for 12 years, and a cost of capital of 14%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

Answer 1

Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$36,400. Indicate the initial cash flow by a negative sign since it is a cash outflow.  
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the cost of capital of 14%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.  

Net present value at 14% cost of capital is $48,504.38.

In case of any query, kindly comment on the solution.