Question

A project costs $4,000. You expect the following cash flows from the project:

Year	Cash Flow
1	$2,000
2	$6,000
3	$4,000
4	$8,000
5	$9,000

If the required rate of return is 14%, what is the NPV of this project?

Round your answer to two decimal places.

Answer 1

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

• Press the CF button.
• CF0= -$4,000. 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 required return of 14%.
• Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 14% required return is $14,482.04.

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