Question

What is the NPV of a project that costs $10,000 today and another $10,000 in one year, and is then expected to generate 8 annual cash inflows of $4,000 each starting at the end of year 5? Assume a cost of capital of 13% and an IRR of 6.17%.

Answer 1

Year	Particulars	Cash Flow	PV Factor	PV Of Cash Flow
		a	b=1/1.13^a	c=a*b
0	Cost of project	$   -10,000	1	$         -10,000.00
1	Cost of project	-10000	0.88496	$           -8,849.56
5	Annual Cash Inflow	4000	0.54276	$             2,171.04
6	Annual Cash Inflow	4000	0.48032	$             1,921.27
7	Annual Cash Inflow	4000	0.42506	$             1,700.24
8	Annual Cash Inflow	4000	0.37616	$             1,504.64
9	Annual Cash Inflow	4000	0.33288	$             1,331.54
10	Annual Cash Inflow	4000	0.29459	$             1,178.35
11	Annual Cash Inflow	4000	0.26070	$             1,042.79
12	Annual Cash Inflow	4000	0.23071	$                 922.82
	NPV			$           -7,076.85