Question

Project Z requires an initial outlay at t = 0 of $50,000, its expected cash inflows are $14,000 per year for 9 years, and its WACC is 12%. What is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.

$ ____

Answer 1

The NPV is computed as shown below:

= Initial investment + Present value of future cash flows

Present value is computed as follows:

= Future value / (1 + r)ⁿ

So, the NPV is computed as follows:

= - $ 50,000 + $ 14,000 / 1.12¹ + $ 14,000 / 1.12² + $ 14,000 / 1.12³ + $ 14,000 / 1.12⁴ + $ 14,000 / 1.12⁵ + $ 14,000 / 1.12⁶ + $ 14,000 / 1.12⁷ + $ 14,000 / 1.12⁸ + $ 14,000 / 1.12⁹

= $ 24,595.50 Approximately

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