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A project has an initial cost of $42,450, expected net cash inflows of $12,000 per year...

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Finance

A project has an initial cost of $42,450, expected net cashinflows of $12,000 per year for 11 years, and a cost of capital of14%. What is the project's NPV? (Hint: Begin by constructing a timeline.) Do not round your intermediate calculations. Round youranswer to the nearest cent.

Answer & Explanation Solved by verified expert
3.7 Ratings (377 Votes)

Compuation of NPV
i ii iii iv=ii*iii
year Cash flow PVIF @ 14% present value
0 -42450     1.0000       (42,450.00)
1 12,000     0.8772         10,526.32
2 12,000     0.7695           9,233.61
3 12,000     0.6750           8,099.66
4 12,000     0.5921           7,104.96
5 12,000     0.5194           6,232.42
6 12,000     0.4556           5,467.04
7 12,000     0.3996           4,795.65
8 12,000     0.3506           4,206.71
9 12,000     0.3075           3,690.10
10 12,000     0.2697           3,236.93
11 12,000     0.2366           2,839.41
        22,982.80
Therefore NPV =        22,982.80

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