Homework Answers
NPV is given by:
Year 1 Cost = $ 3000
Year 2 Cost = $ 3000 + $ 1000 = $ 4000
Year 3 Cost = $ 4000 + $ 1000 = $ 5000
Year 4 Cost = $ 5000 + $ 1000 = $ 6000
Year 5 Cost = $ 6000 + $ 1000 = $ 7000
NPV = [ 3000 / ( 1 + 8%)^1 ] + [ 4000 / ( 1 + 8%)^2 ] + [ 5000 / ( 1 + 8%)^3 ] + [ 6000 / ( 1 + 8%)^4 ] + [ 7000 / ( 1 + 8%)^5 ]
NPV = 2777.78 + 3429.36 + 3969.16 + 4410.18 + 4764.08
NPV = $ 19350.56 = $ 19351 (Option D)
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