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​(Related to Checkpoint​ 11.1) ​ (Net present value​ calculation)  Dowling Sportswear is considering building a new...

​(Related to Checkpoint​ 11.1) ​ (Net present value​ calculation)  Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $6,000,000 and would generate annual net cash inflows of ​$1,200,000 per year for 9 years. Calculate the​ project's NPV using a discount rate of 8 percent.​(Round to the nearest ​dollar.)

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Answer #1

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

  • Press the CF button.
  • CF0= -$6,000,000. It is entered with a negative sign since it is a cash outflow.
  • Cash flow for all the years should be entered.
  • Press Enter and down arrow after inputting each cash flow.
  • After entering the last cash flow, press the NPV button and enter the discount rate of 8%.
  • Press the down arrow and CPT buttons to get the net present value.

Present value of cash flows at 8% the discount rate is $1,496,265.49.

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

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