Compute the NPV for Project M if the appropriate cost of capital is 8 percent. (Negative...

Question

Question

Compute the NPV for Project M if the appropriate cost of capital is 8 percent. (Negative amount should be indicated by a minu

Answer 1

Answer #1

The NPV is computed as shown below:

= Initial investment + Present value of future cash flows

Present value is computed as follows:

= Future value / (1 + r)ⁿ

So, the NPV is computed as follows:

= - $ 1,600 + $ 470 / 1.08 + $ 600 / 1.08² + $ 640 / 1.08³ + $ 720 / 1.08⁴ + $ 220 / 1.08⁵

= $ 536.59 Approximately

Feel free to ask in case of any query relating to this question

Answer 2

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