In: Finance
What is the NPV of a project that costs $31,000 today and is expected to generate annual cash inflows of $11,000 for the next 7 years, followed by a final inflow of $13,000 in year 8. Cost of capital is 8.7%. Round to the nearest cent.
Ans $ 31593.91
Year | Project Cash Flows (i) | DF@ 8.7% | DF@ 8.7% (ii) | PV of Project ( (i) * (ii) ) |
0 | -31000 | 1 | 1 | (31,000.00) |
1 | 11000 | 1/((1+8.7%)^1) | 0.919963 | 10,119.60 |
2 | 11000 | 1/((1+8.7%)^2) | 0.846332 | 9,309.66 |
3 | 11000 | 1/((1+8.7%)^3) | 0.778595 | 8,564.54 |
4 | 11000 | 1/((1+8.7%)^4) | 0.716278 | 7,879.06 |
5 | 11000 | 1/((1+8.7%)^5) | 0.658950 | 7,248.45 |
6 | 11000 | 1/((1+8.7%)^6) | 0.606209 | 6,668.30 |
7 | 11000 | 1/((1+8.7%)^7) | 0.557690 | 6,134.59 |
8 | 13000 | 1/((1+8.7%)^8) | 0.513055 | 6,669.71 |
NPV | 31,593.91 |