Question

The start up costs for a project are $25,000. The cost of capital for the firm is 12%. The sum of the present value of the cash flows for the first three years is $26,420.14.

Required:
Compute the net present value for the project.

Answer 1

net present value = $1,420.14

Step-by-step explanation:

given data

start up costs = $25,000

cost of capital = 12%

present value of the cash flows = $26,420.14

solution

we get here net present value will be express as here

net present value = present value of the cash flows for the first three years - start up costs ........................1

put here value and we get

net present value = $26,420.14 - $25,000

net present value = $1,420.14