Daniel's Market is considering a project with an initial cost of $176,500. The project will not produce any cash flows for the first three years. Starting in Year 4, the project will produce cash inflows of $127,500 a year for three years. This project is risky, so the firm has assigned it a discount rate of 17 percent. What is the project's net present value?

Question

Business

Orion Buckley

17 October, 03:57

Daniel's Market is considering a project with an initial cost of $176,500. The project will not produce any cash flows for the first three years. Starting in Year 4, the project will produce cash inflows of $127,500 a year for three years. This project is risky, so the firm has assigned it a discount rate of 17 percent. What is the project's net present value?

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Answers (1)

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Kayley Roy · Answer 1

NPV = - $601.026

Explanation:

Using a financial calculator, you can solve this question with the following inputs and using the CF function. I'll be using TI BA II plus financial calculator;

After keying in each CF, press ENTER and scroll down twice before keying in the next cashflow;

CF0 = - 176,500

CF1 = 0

CF2=0

CF3 = 0

CF4 = 127,500

CF5 = 127,500

CF6 = 127,500

then press "NPV" button, then I = 17 and press CPT.

Therefore NPV = - $601.026