Question

Find the net present value (NPV) for the following series of future cash flows, assuming the...

Find the net present value (NPV) for the following series of future cash flows, assuming the company’s cost of capital is 8.34 percent. The initial outlay is $446,634.

Year 1: 154,722

Year 2: 126,062

Year 3: 188,802

Year 4: 149,733

Year 5: 173,499

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Answer #1

Given Cash flow,

Year Cash Flow
0 -446634
1 154722
2 126062
3 188802
4 149733
5 173499

NPV is sum of PV of all cash flows at discount rate of 8.34%

So, NPV = -446634 + 154722/1.0834 + 126062/1.0834^2 + 188802/1.0834^3 + 149733/1.0834^4 + 173499/1.0834^5 = $176970.95

net present value (NPV) of the cash flows = $176970.95

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