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A project is expected to cost $85096 up front, and then return$23768 in year 1,...

A project is expected to cost $85096 up front, and then return $23768 in year 1, $45414 in year 2, and $32710 in year 3. If the company demands a 8% return from their projects, what is the net present value of this project? Answers should be to the nearest cent. If your answer is negative please write it as "$-100.03" with the dollar sign before the negative so blackboard can read it correctly.

Solutions

Expert Solution

The NPV is computed as shown below:

= Initial investment + Present value of future cash flows

Present value is computed as follows:

= Future value / (1 + r)n

So, the NPV is computed as follows:

= - $ 85096 + $ 23768 / 1.08 + $ 45414 / 1.082 + $ 32710 / 1.083

= $ 1,812.85 Approximately

jeff jeffy answered 1 year ago
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