Question

DEF Inc. is considering a project that will require an initial outlay of $750,000. DEF executives believe the project will provide an annual net cash flow of $150,000 per year for six years. What is the net present value of the project if the required rate of return is 10%?

A)18,536.78

B)-40,263.50

C)-96,710.90

D)110,623.82

Answer 1

C)-96,710.90

Year	Cash Flow	Discount factor	Present value of cash flow
a	b	c=1.10^-a	d=b*c
0	$   -7,50,000	1.0000	$ -7,50,000.00
1	$     1,50,000	0.9091	$   1,36,363.64
2	$     1,50,000	0.8264	$   1,23,966.94
3	$     1,50,000	0.7513	$   1,12,697.22
4	$     1,50,000	0.6830	$   1,02,452.02
5	$     1,50,000	0.6209	$       93,138.20
6	$     1,50,000	0.5645	$       84,671.09
	Net Present value		$     -96,710.90