Question

What is the net present value of a project that has an initial cash outflow of $7,670 and cash inflows of $1,280 in Year 1, $6,980 in Year 3, and $2,750 in Year 4? The discount rate is 12.5 percent.

Answer 1

$86.87

Step-by-step explanation:

Data provided in the question:

Initial cash outflow = $7,670

Year cash inflows

1 $1,280

3 $6,980

4 $2,750

Discount rate = 12.5%

Now,

Net Present Value =
`(1,280 )/((1+0.125)^1)+frac{6,980}{(1+0.125)^3}+frac{2,750}{(1+0.125)^4}` - $7,670

or

Net Present Value = $1137.78 + $4902.28 + $1716.81 - $7,670

= $86.87