Question

ABC Inc. has a project available with the following cash flows: Year Cash Flow 0 −$32,030 1 8,540 2 10,330 3 14,890 4 16,370 5 11,480 If the required return for the project is 8.8 percent, what is the project's NPV? 

Answer 1

Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$32,030. It is entered with a negative sign since it is a cash outflow.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter required return of 8.8%.
• Press the down arrow and CPT buttons to get the net present value.  

Net Present value of cash flows at 8.8% required return is $15,319.62.