Question

1. What will be the net present value of a project that provides net cash flow of $20,000 at the end of the first year, $7,000 at the end of the second year, and $13,000 at the end of the third year? The initial cost is $8,000 and the appropriate discount rate is 10%.
2. Tophill Corporation is considering a project that will pay $10,000 at the end of the first year, $22,000 at the end of the second year, and $40,000 at the end of the third year. The project's appropriate discount rate is 10% and the project requires an investment tomorrow of $52,000 if we accept the project. What are the NPV and Profitability Index of this project?

Answer 1