Question

Blink of an Eye Company is evaluating a 5-year project that will provide cash flows of $38,500, $76,350, $63,010, $61,030, and $44,210, respectively. The project has an initial cost of $177,120 and the required return is 9 percent. What is the project's NPV?

A. 12159.26

B. 16404.39

C. 10003.83

D. 9094.39

E. 43087.31

Answer 1

E.43087.31

present value factor = 1/(1+r)^n

here,

r = 9%.

=>0.09.

n=0,1,2,3,4,5.

year	cash flow	Present value factor	cash flow * present value factor
0	-177,120	1/(1.09)^0=>1	-177,120
1	38,500	1/(1.09)^1=>0.917431	(38,500*0.917431)=>35,321.09
2	76,350	1/(1.09)^2=>841680	(76,350*0.841680)=>64,622.68
3	63,010	1/(1.09)^3=>0.772183	(63,010*0.772183)=>48,655.25
4	61,030	1/(1.09)^4=>0.708425	(61,030*0.708425)=>43,235.18
5	44,210	1/(1.09)^5=>0.649931	(44,210*0.649931)=>28,733.45
		NPV	43,447.65...(similar to 43,087.31)