A project has an initial cost of $53,750, expected net cash inflows of $12,000 per year...

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A project has an initial cost of $53,750, expected net cash inflows of $12,000 per year...

A project has an initial cost of $53,750, expected net cash inflows of $12,000 per year for 12 years, and a cost of capital of 8%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.

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Answer 1

Answer #1

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=12000[1-(1.08)^-12]/0.08

=12000*7.53607802

=$90432.94

NPV=Present value of inflows-Present value of outflows

=90432.94-53,750

=$36682.94(Approx).

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Answer 2

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A project has an initial cost of $53,750, expected net cash inflows of $12,000 per year...

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