Project S has a cost of $15,000 and is expected to produce benefits (cash flows) of...
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Project S has a cost of $15,000 and is expected to produce benefits (cash flows) of $3,000 per year for 6 years. Calculate the project's Net Present Value (NPV) assuming a cost of capital of 15%.
-$5,734
-$1,675
-$3,647
-$814
$3,000
Homework Answers
The NPV of a project is the PV of the outflows minus the PV of the inflows. Since the cash inflows are an annuity, the equation for the NPV of this project at an 15 percent required return is:
NPV = –$15,000 + $3,000(PVIFA15%, 6)
NPV = -$3,647
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