NPV Calculate the net present value (NPV) for a 20-year project with an initial investment of...

Question

Question

NPV Calculate the net present value (NPV) for a 20-year project with an initial investment of $10,000 and a cash inflow of $2

Answer 1

Answer #1

Dear Student

Please note the solution

> Formula

NPV = Present Value of cash inflow - Present Value of cash outflow

> Calculation

Present Value of Cash inflow = 2000 * Present Value Annuity Factor ( rate, years )

= 2000 * PVAF(16%, 20)

= 2000 * [ 1/1.16 + 1/1.16² + 1/1.16³+ ...... + 1/1.16²⁰ ]

= 2000 * 5.9288

= $ 11,857.60

NPV = 11857.60 - 10000

= 1857.60 Answer

Since NPV is positive and hence project should be accepted.

Stay Safe!!

Answer 2

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