Compute the NPV for Project M if the appropriate cost of capital is 9 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Project M Time: 0 1 2 3 4 5 Cash flow –$1,200 $390 $520 $560 $640 $140
Solution: | |||
NPV for Project M is $572.28 | |||
Working Notes: | |||
A | B | C = A x B | |
Time | Cash flow | PVF @ 9% | Present Value |
0 | -1200 | 1 | -1200 |
1 | 390 | 0.917431193 | 357.7982 |
2 | 520 | 0.841679993 | 437.6736 |
3 | 560 | 0.77218348 | 432.4227 |
4 | 640 | 0.708425211 | 453.3921 |
5 | 140 | 0.649931386 | 90.9904 |
NPV | 572.28 | ||
Notes: PVF is calculated @ 9% = 1/(1+0.09)^n where n is the period for which PVF is calculated. | |||
Notes: | NPV is the net of present values of all the cash inflow and outflows during the life of project . PVF is calculated based on cost of capital | ||
Please feel free to ask if anything about above solution in comment section of the question. |
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