Answer:
NPV= $31,824.16
Explanation:
Giving the following information:
Cash flow= $321,000
Initial investmeent= $1,710,000
Residual value= $0
Rate of return= 13%
To calculate the net present value, we need to use the following formula:
NPV= -Io + ∑[Cf/(1+i)^n]
Io= -1,710,000
Cf1= 321,000/1.13= 284,070.80
Cf2= 321,000/1.13^2= 251,390.09
Cf3= 321,000/1.13^3= 222,469.10
And so on...
Cf10= 321,000/1.13^10= 94,562.86
<u>∑[Cf/(1+i)^n]= 1,741,824.16</u>
NPV= 1,710,000 + 1,741,824.16= $31,824.16
