Question

What is the NPV of a project involving a sausage system with specific financial details?

a) $85,000
b) $120,000
c) $65,000
d) $95,000

Answer 1

The Net Present Value (NPV) of a project is a financial tool used to determine the profitability of an investment. To calculate the NPV, you discount the cash flows to their present value and subtract the initial investment.

Step-by-step explanation:

The Net Present Value (NPV) of a project is a financial tool used to determine the profitability of an investment. It takes into account the initial investment cost, the expected cash flows, and the discount rate. To calculate the NPV, you discount the cash flows to their present value and subtract the initial investment. The NPV of the sausage system project can be calculated using the provided financial details.

1. Identify the cash flows for the project over its lifespan.
2. Calculate the present value of each cash flow by discounting it to the present using the given interest rate as the discount rate.
3. Add up the present values of all cash flows.
4. Subtract the initial investment cost from the total present value to find the NPV.