Answer:
(c) 0.46 million
Step-by-step explanation:
As provided immediate cash outlay = $8 million.
This will represent cash outflow at period 0, as it is made immediately, no time period has lapsed.
Cash inflows as provided and the respective present value factor are:
Year Cash Inflow Factor Discounted Value
1 $3 million 0.9091 $2,727,300
2 $4 million 0.8264 $3,305,600
3 $2 million 0.7513 $1,502,600
Total present value of cash inflow = $7,535,500
Therefore, net present value = $7,535,500 - $8,000,000 = - $464,500
That is - 0.46 million
Correct option is
(c) 0.46 million
