Question

A firm undertakes a five-year project that requires an initial capital investment of $100,000. The project is then expected to provide cash flow of $12,000 per year for the first two years, $50,000 in the third and fourth years, and $10,000 in the fifth year. The project has an end-of-life salvage value of $5,000. If the discount rate applied to these cash flows is 9.50 percent, to the nearest dollar, the net present value of this project is _____

Answer 1

$3.356.86

Step-by-step explanation:

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

NPV can be calculated using a financial calculator:

Cash flow in year 0 = -$100,000

Cash flow in year 1 and 2 = $12,000

Cash flow in year 3 and 4 = $50,000

Cash flow in year 5 = $10,000 + $5,000 = $15,000

I = 9.50%

NPV = $3.356.86

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