Question

A project will produce cash inflows of $2,250 a year for five years. the project initially costs $11,400 to get started. in year six, the project will end and will provide a final cash flow of $1,500. what is the net present value of this project if the required rate of return is 14.4 percent?

a.
b.
c. $461.07
d. $919.92
e. $1,207.50

Answer 1

-$3,080.

Using the CF function of your financial calculator, input the initial investment as a cash outflow (negative) of $11,400, then each of the cash inflows (positive) as $2,250 for each of the first 5 years and $1,500 for the sixth year. Hit the NPV button and input the required rate of return as 14.4% then the NPV will be -$3,080.