Question

15. (Net Present Value) Calculate the project's net present value. The cost of capital is 10%. An initial cash outflow of $6,235 and a free cash flow of $7,125 in 5 years. b. An initial cash outflow of $6,235 and a free cash flow of $7,125 in 3 years An initial cash outflow of $6,235 and a free cash flow of $7,125 in 10 years An initial cash outflow of $6,235 and a free cash flow of $1,125 at the end of the next 5 years An initial cash outflow of $6,235 and a free cash flow of $1,125 at the end of the next 3 years, followed by $1,025 at the end of 5 years. f. An initial cash outflow of $6,235 and a free cash flow of $1,125 at the end of the next 3 years, followed by $1,025 at the end of 5 years. An initial cash outflow of $6,235 followed by $1,025 at the end of 2 years and a free cash flow of $1.125 at the end of the next 3 years Denne

Answer 1

Formula -

NPV = present value of cash inflows - present value of cash outflows or initial cash outflow.

Here initial cash outflow in all situations = $6235.

Here cash inflows is same., So we can use present value annuity table to find the present value of cash inflows.

a) NPV = 7,125 * PVA(5years,10%) - 6,235

= 7,125 * 3.7908 - 6,235

NPV = $ 20,774.45

b)NPV = 7125 *PVA(3years,10%) -6,235

= 7125*2.4869 -6235

= 11484.16

C)NPV = 7125*PVA(10years,10%)-6235

= 7125 * 6.1446 = 37,545.27

D) NPV = 1125* (5years,10%) -6235

= 1125 * 3.7908 - 6235

= (1970.35)