Question

A project costs $8,000. You expect the following cash flows from the project: Year Cash Flow...

A project costs $8,000. You expect the following cash flows from the project:

Year Cash Flow
1 $1,000
2 $4,000
3 $8,000
4 $7,000
5 $9,000

If the required rate of return is 12%, what is the NPV of this project?

Round your answer to two decimal places.

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Homework Answers

Answer #1

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

  • Press the CF button.
  • CF0= -$8,000. 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 12%.
  • Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 12% required return is $11,331.34.

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

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