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?

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.

Solutions

Expert Solution

Calculation of NPV of the Project
Year	Cash Flows	Discount Rate @10%	Discounted Cash Flows
A	B	C = 1/(1+10%)^A	*D = BC**
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

jeff jeffy answered 2 years ago

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