Question

# A project costs \$4,000. You expect the following cash flows from the project: Year Cash Flow...

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?

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.

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