A project has a required return of 12.6 percent, an initial cash outflow of $42,100, and cash inflows of $16,500 in Year 1, $11,700 in Year 2, and $10,400 in Year 4. What is the net present value?

Question

Business

Maximillian Mitchell

30 November, 13:28

A project has a required return of 12.6 percent, an initial cash outflow of $42,100, and cash inflows of $16,500 in Year 1, $11,700 in Year 2, and $10,400 in Year 4. What is the net present value?

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Answers (1)

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Bryan Garcia · Answer 1

The net present value is (11,748) dollars.

Explanation:

The net present value can be calculated by discouting future cash flows using required rate of return and than subtracting initial cash flows from it.

NPV Calculation

Year 0 = (42,100) * 1 = (42,100)

Year 1 = 16,500 * 0.888 = 14,652

Year 2 = 11,700 * 0.789 = 9,231.3

Year 4 = 10,400 * 0.622 = 6,468.8

NPV = (11,748)