In: Finance
A project has an initial cost of $58,425, expected net cash inflows of $10,000 per year for 10 years, and a cost of capital of 10%. 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.
Calculation of NPV of the Project | |||
Year | Cash Flows | Discount Rate @10% | Discounted Cash Flows |
A | B | C = 1/(1+10%)^A | D = B*C |
0 | -58425 | 1 | -58425 |
1 | 10000 | 0.909090909 | 9090.909091 |
2 | 10000 | 0.826446281 | 8264.46281 |
3 | 10000 | 0.751314801 | 7513.148009 |
4 | 10000 | 0.683013455 | 6830.134554 |
5 | 10000 | 0.620921323 | 6209.213231 |
6 | 10000 | 0.56447393 | 5644.739301 |
7 | 10000 | 0.513158118 | 5131.581182 |
8 | 10000 | 0.46650738 | 4665.073802 |
9 | 10000 | 0.424097618 | 4240.976184 |
10 | 10000 | 0.385543289 | 3855.432894 |
NPV | 3020.671057 | ||
Therefore, Project's NPV is $3,020.67 |