Given the following end of year cash flows (CF), what is the net-present value (NPV) of...
Given the following end of year cash flows (CF), what is the net-present value (NPV) of this investment opportunity. Assume that the project’s cost of capital is 10%. Round your final answer to two decimals. Timeline 0 1 2 3 4 CF -900 400 400 400 800
Homework Answers
NPV is calcualted as follows:
| Year | CF | Discount Factor | Discounted CF | ||
| 0 | $-900.00 | 1/(1+0.1)^0= | 1 | 1*-900= | $ -900.00 |
| 1 | $ 400.00 | 1/(1+0.1)^1= | 0.909090909 | 0.909090909090909*400= | $ 363.64 |
| 2 | $ 400.00 | 1/(1+0.1)^2= | 0.826446281 | 0.826446280991735*400= | $ 330.58 |
| 3 | $ 400.00 | 1/(1+0.1)^3= | 0.751314801 | 0.751314800901578*400= | $ 300.53 |
| 4 | $ 800.00 | 1/(1+0.1)^4= | 0.683013455 | 0.683013455365071*800= | $ 546.41 |
| NPV = Sum of all Discounted CF | $ 641.15 |
So the NPV is $641.15
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