Question

What is the net present value (NPV) of your proposed expansion into the Canada? Assume that the cash flows after year 0 occur at the end of each year. The required rate of return is 15.8%. (Round to nearest penny) Year 0 cash flow = -940,000 Year 1 cash flow = -150,000 Year 2 cash flow = 380,000 Year 3 cash flow = 450,000 Year 4 cash flow = 480,000 Year 5 cash flow = 530,000

Answer 1

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

• Press the CF button.
• CF0= -$940,000. 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 rate of return of 15.8%.
• Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 15.8% required rate of return is $25,099.29.

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