Question

What is the net present value of a project that has an initial cash outflow of $7,670 and cash inflows of $1,280 in Year 1, $6,980 in Year 3, and $2,750 in Year 4? The discount rate is 12.5 percent.

Answer 1

Answer:

$86.87

Explanation:

Data provided in the question:

Initial cash outflow = $7,670

Year     cash inflows

 1               $1,280

 3              $6,980

 4               $2,750

Discount rate = 12.5%

Now,

Net Present Value = $\frac{1,280 }{(1+0.125)^1}+frac{6,980}{(1+0.125)^3}+frac{2,750}{(1+0.125)^4}$ - $7,670

or

Net Present Value = $1137.78 + $4902.28 + $1716.81 - $7,670

= $86.87