Ask Question
20 March, 12:14

Molly is considering a project with cash inflows of $811, $924, $638, and $510 over the next four years, respectively. The relevant discount rate is 11.2 percent. What is the net present value of this project if it the start-up cost is $2,700?

a. - $425.91

b. - $131.83

c. - $383.01

d. $10.45

e. $229.50

+5
Answers (1)
  1. 20 March, 15:51
    0
    A. - $425.91

    Explanation:

    Given that

    Start up cost = 2700

    Cash inflow 1 = 811

    Cash inflow 2 = 924

    Cash inflow 3 = 638

    Cash inflow 4 = 510

    Rate = 11.2% or 0.112

    Recall that

    NPV = E (CF/1 + i]^n) - initial investment or start up cost

    Where

    E = summation

    CF = Cash flow

    i = discount rate

    n = years

    Thus

    NPV = - $2,700 + $811 / 1 + 0.112 + $924 / 1 + 0.112^2 + $638 / 1 + 0.112^3 + $510 / 1 + 0.112^4

    NPV = - $425.91

    Therefore, NPV = - $425.91
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Molly is considering a project with cash inflows of $811, $924, $638, and $510 over the next four years, respectively. The relevant ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers