Question

Daniel's Market is considering a project with an initial cost of $176,500. The project will not produce any cash flows for the first three years. Starting in Year 4, the project will produce cash inflows of $127,500 a year for three years. This project is risky, so the firm has assigned it a discount rate of 17 percent. What is the project's net present value?

Answer 1

NPV = Present Value of Cashflows - Initial Investment

Year	Cash Flow	PVIF @17%	Present Value
0	$ (176,500.00)	1.0000	$      (176,500.00)
1	$                       -	0.8547	$                          -
2	$                       -	0.7305	$                          -
3	$                       -	0.6244	$                          -
4	$ 127,500.00	0.5337	$           68,040.38
5	$ 127,500.00	0.4561	$           58,154.17
6	$ 127,500.00	0.3898	$           49,704.42
		NPV	$         (601.03)