A project has an initial cost of $70,000, expected net cash inflows of $12,000 per year...

A project has an initial cost of $70,000, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 9%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.

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Expert Solution

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=12000/1.09+12000/1.09^2+12000/1.09^3+12000/1.09^4+12000/1.09^5+12000/1.09^6+12000/1.09^7+12000/1.09^8+12000/1.09^9

=71942.96

NPV=Present value of inflows-Present value of outflows

=71942.96-70,000

=$1942.96(Approx)

jeff jeffy answered 2 years ago

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