Question

You invest 1,000 in a project today. the project will generate a cash flow of 3186 three years from now. if the interest rate is 3%, what is the net present value of the project?

Answer 1

NPV= $1,915.64

Step-by-step explanation:

Giving the following information:

Cash flow= $3,186

Number of periods= 3 years

Interest rate= 3%

Initial investment (Io)= $1,000

To calculate the net present value, we need to use the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

NPV= -1,000 + (3,186/1.03^3)

NPV= $1,915.64