A firm is evaluating a project with an initial cost of $ 823,691 and annual cash...
A firm is evaluating a project with an initial cost of $ 823,691 and annual cash inflows of $ 264,950 per year (first cash flow to be received exactly one year from today) for each of the next 5 years. If the cost of capital for this project is 12 %, what is this project's NPV?
Homework Answers
| Discount rate | 12.000% | |||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flow stream | -823691 | 264950 | 264950 | 264950 | 264950 | 264950 |
| Discounting factor | 1.000 | 1.120 | 1.254 | 1.405 | 1.574 | 1.762 |
| Discounted cash flows project | -823691.000 | 236562.500 | 211216.518 | 188586.177 | 168380.515 | 150339.745 |
| NPV = Sum of discounted cash flows | ||||||
| NPV Project = | 131394.45 | |||||
| Where | ||||||
| Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||
| Discounted Cashflow= | Cash flow stream/discounting factor | |||||
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