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The cash flows associated with an investment project are an immediate cost of $1300 and benefits...

The cash flows associated with an investment project are an immediate cost of $1300 and benefits of $1000 in one year, $1900 in two years, and $1500 in three years. The cost of capital (WACC) is 10%. What is the project's NPV?

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Expert Solution

Net Present Value calculation:
Year Inflows Discounting Factor@ 10% Discounting
Cash inflow
1 $           1,000.00                                  0.9091 $                  909.00
2               1,900.00                                  0.8264 $              1,570.00
3               1,500.00                                  0.7513 $              1,127.00
TOTAL $        3,606.00
Therefore, Net Present Value (NPV) = Sum of Discounting Cash inflow - Initial Investment
= $3,606 - $1,300 = $2,306

ekkarill92 answered 2 years ago
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