Question

A project requires a $28,000 investment and is expected to generate end-of-period annual cash inflows as follows: Year 1 Year 2 Year 3 $12,000 $13,000 $12,000 Assuming a discount rate of 10%, what is the net present value of this investment

Answer 1

Answer:

$2,668.67

Explanation:

Net present value is the present value of after-tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator

Cash flow in year 0 =  $-28,000

Cash flow in year 1 =  $12,000

Cash flow in year 2 =  $13,000

Cash flow in year 3 =  $12,000

I = 10%

NPV = $2,668.67

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute