Question

A project your firm is considering requires an investment today of $54,000 and is forecasted to generate cash flows at years 1 through 14 (payments at t = 1 through t = 14) of $15,800 and a cash flow at year 15 (at t = 15) of -$60,200. Please take note that the cash flow at t = 15 is negative. If the appropriate discount rate for capital budgeting purposes is 10.5% per year, what is the NPV? Enter your answer accurate and rounded to the nearest dollar (i.e., the nearest integer).

Answer 1

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

• Press the CF button.
• CF0= -$54,000. Indicate the initial cash flow by a negative sign since it is a cash outflow.  
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 10.5%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.  

Net present value at 10.5% discount rate is $45,825.15.

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