Question

What is the net present value of a project with the following cash flows if the discount rate is 15 percent? The project costs $48,100 Year 1 $15,600 Year 2 $15,600 Year 3 $28,900 Year 4 $15,200 Select one: a. More than $15;000 b. $5,000-$10,000 c. Negative d. $10,000-$15,000 e. Zero to $5,000

Answer 1

Answer:

The correct answer is option e

e. Zero to $5,000

Explanation:

Net Present Value (NPV) : This is one of the techniques available to evaluate the feasibility of an investment project. The NPV of a project is the difference between the present value of the cash inflows and the cash outflows of the project discounted at the required rate of return

PV of cash inflows

=  $15,600 × (1.15)^(-1) + ( $15,600× 1.15^(-2) + ($28,900 × 1.15^(-3) ($15,200 × 1.15^(-4)

=53,053.92

NPV =53,053.92-48,100

NPV =4,953.927