Question

What is the NPV of the following project. An investment today of $ 6,000. A cash...

What is the NPV of the following project. An investment today of $ 6,000. A cash flow in year 1 of $ 3,000, a cash flow in year 2 of $ 3,000, a cash flow in year 3 of $ 5,000, and a cash flow in year 4 of $ 7,000. The appropriate Cost of Capital (quoted interest rate) is 13%.

Enter your answer to the nearest $.01.

Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.

Homework Answers

Answer #1

Net present value = Present value of cash inflows - Initial Investment

Initial Investment = $6,000

Present value = Future value / (1 + R)T

R = rate of interest

T = Time in years

Present value of cash inflows= [$3,000 / (1.13)1] + [$3,000 / (1.13)2] + [$5,000 / (1.13)3] + [$7,000 / (1.13)4]

Present value of cash inflows = $2,654.87 + $2,349.44 + $3,465.25 + $4,923.23

Present value of cash inflows = $12,762.79

Net Present value = $12,762.79 - $6,000

Net Present value = $6,762.79

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