You have an opportunity to invest $102,000 now in return for $79,500 in one year and...

Question

Question

Answer 1

Answer #1

To calculate the NPV of the project

Net present value (NPV) of Project = Sum of [net cash inflows/ (1+r) ^t] - initial cash outflow

Where,

Required rate of return or cost of capital r =9.2%

And time period t = 1 and 2

Initial cash outflow = $102,000

Cash inflow for year 1 =$79,500

Cash inflow for year 2 =$29,100

NPV = $79,500/ (1+9.2%) ^1 +$29,100/ (1+9.2%) ^2 - $102,000

= $72,802.20 + $24,403.25 - $102,000

= - $4,794.55

Net present value (NPV) of Project is - $4,794.55

Answer 2

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