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Net present value: Riggs Ltd is planning to spend $650,000 on a new marketing campaign. It...

Net present value: Riggs Ltd is planning to spend $650,000 on a new marketing campaign. It believes that this action will result in additional cash flows of $299,173 over the next three years. If the discount rate is 17.5 percent, the NPV is $___

(Round your answer to 2 decimal places. All intermittent calculations should be rounded to 4 decimal places before carrying to next calculation. If the number is negative identify with a negative symbol (-).)

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Answer #1

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

  • Press the CF button.
  • CF0= -$650,000. 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 discount rate of 17.5%.
  • Press the down arrow and CPT buttons to get the net present value.

Net Present value of cash flows at 17.5% discount rate is $5,729.54.

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

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