Practice Question
A project is expected to have cash inflows of $30,000 in Year 1, $40,000 in Year 2, and $50,000 in Year 3. If the required rate of return is 12%, what is the NPV of this project?
Answer +
0.000
Step-by-step solutions +
Step 1: Identify cash flows and the required return.
Cash inflows: Year 1 = $30,000, Year 2 = $40,000, Year 3 = $50,000; r = 12%
Step 2: Use NPV formula:
NPV = Σ (CF / (1 + r)t)
Step 3: Calculate NPV:
= ($30,000 / 1.12) + ($40,000 / 1.12²) + ($50,000 / 1.12³)
= $26,785.71 + $31,847.36 + $35,697.23
= $94,330.30
Final NPV: $94,330.30
Cash inflows: Year 1 = $30,000, Year 2 = $40,000, Year 3 = $50,000; r = 12%
Step 2: Use NPV formula:
NPV = Σ (CF / (1 + r)t)
Step 3: Calculate NPV:
= ($30,000 / 1.12) + ($40,000 / 1.12²) + ($50,000 / 1.12³)
= $26,785.71 + $31,847.36 + $35,697.23
= $94,330.30
Final NPV: $94,330.30