Question

A project has the following cash flows: -16900, 7600, 8900, 7400. What is the NPV at a discount rate of:

a) 12 percent
b) 21 percent
c) 28 percent
d) None of the above

Answer 1

The Net Present Value (NPV) is a method used in financial analysis to determine the present value of an investment by discounting future cash flows. To calculate the NPV, discount each cash flow from the project at the given discount rates and then sum them up.

Step-by-step explanation:

The Net Present Value (NPV) is a method used in financial analysis to determine the present value of an investment by discounting future cash flows. It takes into consideration the timing and magnitude of cash inflows and outflows.

To calculate the NPV, we need to discount each cash flow from the project at the given discount rates (12%, 21%, and 28%) and then sum them up. The formula is:

NPV = CF0 / (1+r)0 + CF1 / (1+r)1 + CF2 / (1+r)2 + CF3 / (1+r)3

Where CF0, CF1, CF2, and CF3 are the cash flows in each period and r is the discount rate.

Using this formula, you can calculate the NPV for each discount rate provided in the question.