Question

What is the net present value of a project with the following cash flows if the required rate of return is 9 percent? (round answer to nearest dollar) Year Cash Flow 0 -$43,258 1 $18,708 2 $21,200 3 $17,800

Answer 1

Answer:

NPV= 5,493.79

Explanation:

To calculate the net present value (NPV), we need to use the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

Cf1= 18,708 / 1.09= 17,163.30

Cf2= 21,200 / 1.09^2= 17,843.62

Cf3= 17,800 / 1.09^3= 13,744.87

∑[Cf/(1+i)^n]= $48,751.79

NPV= -43,258 + 48,751.79

NPV= $5,493.79