NPV A project has an initial cost of $44,175, expected net cash inflows of $13,000 per year for 6 years, and a cost of c...

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NPV A project has an initial cost of $44,175, expected net cash inflows of $13,000 per year for 6 years, and a cost of c...

NPV

A project has an initial cost of $44,175, expected net cash inflows of $13,000 per year for 6 years, and a cost of capital of 14%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

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Answer 1

Answer #1

NPV = Present value of cash inflows - present value of cash outflows

NPV = Annuity * [1 - 1 / (1 + r)ⁿ] / r - Initial investment

NPV = 13,000 * [1 - 1 / (1 + 0.14)⁶] / 0.14 - 44,175

NPV = 13,000 * [1 - 0.455587] / 0.14 - 44,175

NPV = 13,000 * 3.888668 - 44,175

NPV = $6,377.68

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Answer 2

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