Question

Aerospace Dynamics will invest $156,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. (Note that the fourth year’s cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Answer 1

$17,098.11

Step-by-step explanation:

Please find attached the cash flows used in answering this question.

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

We are to find the net present value

Cash flow in year 0 = $-156,000

Cash flow in year 1 = 52,000

Cash flow in year 2 = 62,000

Cash flow in year 3 = 56,000

Cash flow in year 4 = -55,000

Cash flow in year 5 = 120,000

NPV = $17,098.11

To find the NPV using a financial calculator:

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