A proposed project has an initial cost of $74,500 and is expected to produce cas

Question

A proposed project has an initial cost of $74,500 and is expected to produce cash inflows of $27,200, $48,500, and $40,500 over the next 3 years, respectively. What is the net present value of this project at a discount rate of 14.8 percent?

$13,156.05

$10,869.37

$14,039.36

$12,763.07

A proposed project has an initial cost of $74,500 and is expected to produce cash inflows of $27,200, $48,500, and $40,500 over the next 3 years, respectively. What is the net present value of this project at a discount rate of 14.8 percent?

Explanation / Answer

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=27200/1.148+48500/1.148^2+40500/1.148^3

=$87263.07(Approx)

NPV=Present value of inflows-Present value of outflows

=$87263.07-$74500

=$12763.07(APPROX)

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