Homework Answers
Answer:
A)
B)
| Year | Initial Investment | Revenue | Salavage value | Total Cash flow |
| 0 | -4000 | -4000 | ||
| 1 | 1500 | 1500 | ||
| 2 | 2000 | 2000 | ||
| 3 | 2500 | 2500 | ||
| 4 | 3000 | 600 | 3600 |
r=8%
Since PV=CF/(1+r)^n
CF=cash flow
r=interest rate
n= Year in which cash flow occur
NPV=1500/(1+8%)^1+2000/(1+8%)^2+2500/(1+8%)^3+3600/(1+8%)^4 -4000
NPV=$3734.25
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