Question

An investment has an installed cost of $534,800. The cash flows over the four-year life of the investment are projected to be $214,850, $231,450, $198,110, and $146,820. If the discount rate is zero, what is the NPV? (Omit $ sign in your response.) NPV

Answer 1

Solution and Explanation:

(a)-NPV if the Discount Rate is Zero

If the Discount Rate is Zero, the NPV of the Project is the sum of the Future cash flows deducted by Initial Investment

Net Present Value (NPV)
`=-\$ 534,800+\$ 214,850+\$ 231,450+\$ 198,110+\$ 146,820`

= $256,430

If the Discount Rate is Zero, The NPV will be $256,430”

(b)- NPV If the discount rate is infinite

If the Discount Rate is Infinite, the NPV of the Project is the Initial Investment

NPV = -$534,800 (Negative)