Question

Consider the Obsidian Project, which requires an investment of $434,471 initially, with subsequent cash flows of $51,898, $74,626 and $98,063. We can characterize the project with the following end-of-year cash flows:

Period	Cash Flow
0	(434,471)
1	51,898
2	74,626
3	98,063

What is the net present value (NPV) of the Obsidian Project if the required rate of return for the project is 9%?

Round your answer to 2 decimal places (e.g. 125.74632 = 125.75).

Answer 1

- Calculating the Net Present Value(NPV) of the Project:-

Year	Cash Flow of Project ($)	PV Factor @9%	Present Value of Project ($)
0	(434,471.00)	1.00000	(434,471.000)
1	51,898.00	0.91743	47,612.844
2	74,626.00	0.84168	62,811.211
3	98,063.00	0.77218	75,722.629
			(248,324.32)

So, NPV of Project is -$248,324.32

Note- PV Factor@9% can be taken from PVAF Table or calculated using this formula which is = 1/(1+0.09)^n

where, n = Respective year.

For example, PV Factor@9% of 2nd year = 1/(1+0.09)^2 = 1/1.1881 = 0.84168

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