Question

A project will produce cash inflows of $5,400 a year for 3 years with a final cash inflow of $2,400 in Year 4. The project's initial cost is $13,400. What is the net present value if the required rate of return is 14.2 percent

Answer 1

Answer:

Net Present Value (NPV) is 506

Explanation:

See document attached.  To get the net present value,  we make a cash flow in excel.  

At moment 0 we have the investment cost , in this case $13,400. From period 1 to period 4, we have different incomes. Then, we calculate the Net cash flow that is the difference between benefits and cost.

To get  net present value,  we use VNA formula.  

=VNA(required rate of return; Net cash flow from moment 1 to moment 4 )+Net cash flow at moment 0

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