Question

2C. Assume the net cash flows for years 2014 through 2018 are as detailed below. Calculate the net present value of the project in 2014 using only the net cash flows for years 2014 through 2018 if the MARR is 6% per year, compounded annually. (note: round your answer to two decimal places; do not include spaces, commas, or currency signs in your answer). Year 2014 2015 2016 2017 2018 Net Cash Flow -260,000 12,500 86,750 168,000 214,600 ($)

Answer 1

We would list down the yearly cash flows, discounting factor (MARR) and Net cash flow in a tabular form:

Year	Net cash flow	MARR 6% (Refer Note 1)	Present value
2014	-2,60,000	0.94	-2,45,283
2015	12,500	0.89	11,125
2016	86,750	0.84	72,837
2017	1,68,000	0.79	1,33,072
2018	2,14,600	0.75	1,60,362
			1,32,112

Hence, the net present value is $132,112.

Note 1:It is being assumed that the cash flow of ($260,000) is arising at the end of 2014. Therefore:

Year	Calculation	MARR
2014	1/1.06	0.94
2015	0.94/1.06	0.89
2016	0.89/1.06	0.84
2017	0.84/1.06	0.79
2018	0.79/1.06	0.75