What is the net present value of a project that requires an initial investment of $76,000...

What is the net present value of a project that requires an initial investment of $76,000 and produces net cash flows of $22,000 per year for 7 years? Assume the discount rate is 15 percent.

a.	$91,520
b.	$15,520
c.	$78,000
d.	$167,474

Expert Solution

NPV = PV of cash flows - Initial investment

PV of cash flows = Cash flow * (1- (1 + R)^-N)/R

= 22000 * (1 - (1+15%)^-7)/0.15

= 22000 * 4.16

= 91520

NPV = 91520 - 76000

= 15520

Correct choice B

jeff jeffy answered 2 years ago

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