Homework Answers
Net Present Value (NPV) of the Project
|
Year |
Annual cash flows ($) |
Present Value Factor (PVF) at 10% |
Present Value of annual cash flows ($) [Annual cash flow x PVF] |
|
1 |
1,95,000 |
0.909 |
1,77,255 |
|
2 |
1,60,000 |
0.826 |
1,32,160 |
|
3 |
1,20,000 |
0.751 |
90,120 |
|
4 |
80,000 |
0.683 |
54,640 |
|
TOTAL |
4,54,175 |
||
Net Present Value (NPV) of the Project = Present Value of annual cash inflows – Initial Investment
= $454,175 - $460,000
= -$5,825 (Negative NPV)
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