Question

A project that provides annual cash flows of $16,800 for nine years costs $74,000 today. what is the npv for the project if the required return is 8 percent?

Answer 1

$30,947.92

Step-by-step explanation:

The computation of the net present value is shown below:

= Present value of all yearly cash inflows after applying discount factor + - initial investment

where,

The Initial investment is $74,000

All yearly cash flows would be

= Annual cost savings × PVIFA for 9 years at 8%

= $16,800 × 6.2469

= $104,947.92

Refer to the PVIFA table

So, the net present value is

= $104,947.92 - $74,000

= $30,947.92