Calculate the net present value for a 15-year project with an initial investment of $ 0...
Calculate the net present value for a 15-year project with an initial investment of $ 0 and a cash inflow of $2,000 per year. Assume that the firm has an opportunity cost of 13%. Comment on the acceptability of the project. The project's net present value is $____ .
Homework Answers
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=2000[1-(1.13)^-15]/0.13
=2000*6.462378823
=$12924.76(Approx).
NPV=Present value of inflows-Present value of outflows
=$12924.76-0
=$12924.76(Approx)
Hence since NPV is positive;project must be accepted.
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