1. Calculate the net present value (NPV) for a 10-year project with an initial investment of...
1. Calculate the net present value (NPV) for a 10-year project with an initial investment of $25,000 and a cash inflow of $7,000 per year. Assume that the firm has an opportunity cost of 17%.
The project's net present value is $_____.
Homework Answers
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=7000[1-(1.17)^-10]/0.17
=7000*4.658603628
=$32610.23
NPV=Present value of inflows-Present value of outflows
=$32610.23-$25000
=$7610.23(Approx).
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