In: Finance
> Concept
Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project.
> Formula
NPV = Present Value of Cash inflow ( PVCI ) - Present Value of Cash outflow ( PVCO )
> Calculation
= $ 10000
= 3500 * PVAF(12%, 4)
= 3500 * [ 1/1.12 + 1/1.122 + 1/1.123 + 1/1.124 ]
=3500 * 3.03735
= $ 10630.72
= 10630.72 - 10000
= $ 630.72 Answer
Hope you understand the solution.