Question

A company is considering a long term investment project. It will require an investment of $128,300. Useful life is 4 years. No salvage value. Annual cash inflows would increase $80,300 and annual cash outflows would increase $40,400. The company's required rate of return is 9 percent. Calculate the net present value of this project

Answer 1

CALCULATION OF THE NET PRESENT VALUE OF THE PROJECT
Year	Cash inflow	Cash Outflow	Net cash Flow	PVF @ 9%	Present Value
0	$                                   -	$          -1,28,300	$             -1,28,300	1.0000	$ -1,28,300.00
1	$                          80,300	$                40,400	$                   39,900	0.9174	$       36,605.50
2	$                          80,300	$                40,400	$                   39,900	0.8417	$       33,583.03
3	$                          80,300	$                40,400	$                   39,900	0.7722	$       30,810.12
4	$                          80,300	$                40,400	$                   39,900	0.7084	$       28,266.17
		Total of Present Value =			$             964.82
	Answer = Net present value of the project =			$                     964.82