Question

Find the net present value (NPV) of a project that requires an initial investment of $110,000 and provides cash flows of $13,500 per year for 15 years? The investor’s required return is 18.5%.

Answer 1

Calculating the Net Present Value of the project:

Year	Cash Flows ($)	PV Factor @18.50%	Present Value ($)
0	(110,000.00)	1.0000	(110,000.00)
1	13,500.00	0.8439	11,392.41
2	13,500.00	0.7121	9,613.84
3	13,500.00	0.6010	8,112.95
4	13,500.00	0.5071	6,846.37
5	13,500.00	0.4280	5,777.53
6	13,500.00	0.3612	4,875.55
7	13,500.00	0.3048	4,114.39
8	13,500.00	0.2572	3,472.06
9	13,500.00	0.2170	2,930.01
10	13,500.00	0.1832	2,472.58
11	13,500.00	0.1546	2,086.56
12	13,500.00	0.1304	1,760.81
13	13,500.00	0.1101	1,485.92
14	13,500.00	0.0929	1,253.94
15	13,500.00	0.0784	1,058.18
		NPV	(42,746.91)

So,  the net present value (NPV) of a project is - $42,746.91

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