Question

Given the following information, calculate the net present value:Initial outlay is $50,000; required rate of return is 10%; current prime rate is 12%; and cash inflows at the end of the next 4 years are $60,000, $30,000, $40,000, and $50,000.A. less than 0B. equal to 0C. $87,734D. $93,542

Answer 1

$93,542

Step-by-step explanation:

Net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be found using a financial calculator.

Cash flow in year 0 = $-50,000

Cash flow in year 1 = $60,000

Cash flow in year 2 = $30,000

Cash flow in year 3 = $40,000

Cash flow in year 4 = $50,000

I = 10%

NPV = $93.542.11

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you