Problem 10-01 NPV A project has an initial cost of $74,950, expected net cash inflows of...

Problem 10-01
NPV

A project has an initial cost of $74,950, expected net cash inflows of $14,000 per year for 12 years, and a cost of capital of 11%. 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.

Expert Solution

NPV = $15,942.99

Calculations:

Year (n)	Cash flows	1+r	PVIF = 1/(1+r)^n	PV = cash flow * PVIF
0	- 74,950.00	1.11	1.0000	- 74,950.00
1	14,000.00		0.9009	12,612.61
2	14,000.00		0.8116	11,362.71
3	14,000.00		0.7312	10,236.68
4	14,000.00		0.6587	9,222.23
5	14,000.00		0.5935	8,308.32
6	14,000.00		0.5346	7,484.97
7	14,000.00		0.4817	6,743.22
8	14,000.00		0.4339	6,074.97
9	14,000.00		0.3909	5,472.95
10	14,000.00		0.3522	4,930.58
11	14,000.00		0.3173	4,441.97
12	14,000.00		0.2858	4,001.77

			NPV = sum of all PVs	*15,942.99*

jeff jeffy answered 3 months ago

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