Question

Calculate the net present of the following cash flow projection based on rate of 10.5% for4 years cash flow (213,000), 42,000, 49,000, 53,000, 65,000. What is the net present value?

Is this a good project for the business to accept / Why or why not?

Answer 1

Year	Cash flow	PVIF at 10.5%	PV at 10.5%
0	$   -2,13,000	1.00000	$     -2,13,000
1	$        42,000	0.90498	$          38,009
2	$        49,000	0.81898	$          40,130
3	$        53,000	0.74116	$          39,282
4	$        65,000	0.67073	$          43,598
NPV			$         -51,981
As the NPV is negative, the business should not
accept the project.