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14 September, 03:41

What is the net present value of a project that has an initial cost of $40,000 and produces cash inflows of $8,000 a year for 11 years if the discount rate is 15 percent?

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  1. 14 September, 06:03
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    First find the present value of cash inflows using the formula of

    Pv=pmt [ (1 - (1+r) ^ (-n)) : r]

    Pv=8,000 * ((1 - (1+0.15) ^ (-11)) : (0.15))

    pv=41,869.69

    The net present value is

    NPV=41,869.69-40,000=1,869.69
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