Question

A project has an initial cost of $40,400, expected net cash inflows of $14,000 per year for 9 years, and a cost of capital of 12%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

Answer 1

$59,750

Explanation:

According to the given situation, the calculation of net present value is shown below:-

Net present value = Net cash inflows × PVIFA factor(9,12%) - Initial cost

= $14,000 × 7.1607 - $40,400

= $100,250 - $40,500

= $59,750

Therefore as per the situation for computing the net present value we simply applied the above formula.