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.

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