Question

Curtis is considering a project with cash inflows of $918, $867, $528, and $310 over the

next four years, respectively. The relevant discount rate is 11 percent. What
is the net present value of this project if it the start up cost is $2,100?
A) $20.98
B) $46.48
C) $52.14
D) $74.22
E) $80.81

Answer 1

A) $20.98

Step-by-step explanation:

First, find the PV of each cash inflow;

PV(of CF1) = 918/(1.11) = 827.0270

PV(of CF2) = 867 / (1.11²) =703.6766

PV(of CF3) = 528/(1.11³) = 386.0690

PV(of CF4) = 310 / (1.11^4) =204.2066

Sum up the PVs;

= 827.0270 + 703.6766 + 386.0690 + 204.2066

= $2,120.9792

NPV = -initial investment + SUM of PVs of future cash inflows

= -2,100 + 2,120.9792

= $20.98