A project has an initial cost of $74,125, expected net cash inflows of $14,000 per year...

A project has an initial cost of $74,125, expected net cash inflows of $14,000 per year for 12 years, and a cost of capital of 9%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

Solutions

Expert Solution

Answer:

Present Value of Annual Cash inflows
           = Annual cash inflows x PVAF ( 9%, 12 Years )
           =   $ 14,000 x 7.16073
           =   $ 100,250.22

Net Present Value
        = Present Value of Annual Cash inflows (-) Initial Investment
        =     $ 100,250.22 (-) $ 74,125
        =    $ 26,125.22

Net Present Value = $ 26,125.22

ekkarill92 answered 1 year ago

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