Question

A project has the following cash flows: year 0 = -500 year 1 = $140.00 year...

A project has the following cash flows:

year 0 = -500
year 1 = $140.00
year 2 = $200.00
year 3 = $310.00

What is the project's NPV if the interest rate is 6%?

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Answer #1

NPV = C1/ (1+i) + C2/ (1+i) 2 + C3/ (1+i) 3 – C0

         = $ 140/ (1+0.06) + $ 200/ (1+0.06) 2 + $ 130/ (1+0.06) 3 – $ 500

         = $ 140/ (1.06) + $ 200/ (1.06) 2 + $ 130/ (1.06) 3 – $ 500

         = $ 140/ (1.06) + $ 200/ 1.1236 + $ 130/ 1.191016 – $ 500

         = $ 132.0754717 + $ 177.999288 + $ 260.2819777 – $ 500

         = $ 570.3567374 – $ 500 = $ 70.35673744 or $ 70.36

NPV is $ 70.36

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