Stone Inc. is evaluating a project with an initial cost of $9,500. Cash inflows
ID: 2358247 • Letter: S
Question
Stone Inc. is evaluating a project with an initial cost of $9,500. Cash inflows are expected to be $1,500, $1,500 and $10,000 in the three years over which the project will produce cash flows. If the discount rate is 9%, what is the net present value of the project?
Stone Inc. is evaluating a project with an initial cost of $9,500. Cash inflows are expected to be $1,500, $1,500 and $10,000 in the three years over which the project will produce cash flows. If the discount rate is 9%, what is the net present value of the project?
Explanation / Answer
NPV = -9500 + 1500/(1+.09) + 1500/(1+.09)2 + 10000/(1+.09)3
NPV = -9500 + 1376.14 + 1262.52 + 7721.83
NPV =$860.494
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