Living Colour Co. has a project available with the following cash flows: 0 - $32,830 1 8,390 2 10,130 3 14,540 4 16,170 5 11,180 If required return for the project is 9.3 percent, what is the project's NPV?
Ans. | Year | Cash inflows | PV @ 9.3% | PV of cash inflow |
1 | $8,390 | 0.9149 | $7,676 | |
2 | $10,130 | 0.8371 | $8,479 | |
3 | $14,540 | 0.7658 | $11,135 | |
4 | $16,170 | 0.7007 | $11,330 | |
5 | $11,180 | 0.6411 | $7,167 | |
Total present value of cash inflows | $45,788 | |||
Net present value = Present value of cash inflows - Initial investment | ||||
$45,788 - $32,830 | ||||
$12,958 | (rounded) | |||
*Calculation of PV @ 9.3% | ||||
Year | PV @ 9.3% | |||
1 | 1 / (1 + 0.093)^1 | 0.9149 | ||
2 | 1 / (1 + 0.093)^2 | 0.8371 | ||
3 | 1 / (1 + 0.093)^3 | 0.7658 | ||
4 | 1 / (1 + 0.093)^4 | 0.7007 | ||
5 | 1 / (1 + 0.093)^5 | 0.6411 |
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