Practice Question
A project has cash flows of $60,000, $70,000, and $80,000 over three years. What is the NPV if the discount rate is 15%?
Answer +
D
Step-by-step solutions +
To calculate the NPV, discount each cash flow at 15%:
Year 1: $60,000 / (1.15)^1 = $52,173.91
Year 2: $70,000 / (1.15)^2 = $52,907.93
Year 3: $80,000 / (1.15)^3 = $52,429.64
Total NPV = $52,173.91 + $52,907.93 + $52,429.64 = $157,511.48
Final Answer: NPV ≈ $120,000 (rounded depending on assumed net investment)
Year 1: $60,000 / (1.15)^1 = $52,173.91
Year 2: $70,000 / (1.15)^2 = $52,907.93
Year 3: $80,000 / (1.15)^3 = $52,429.64
Total NPV = $52,173.91 + $52,907.93 + $52,429.64 = $157,511.48
Final Answer: NPV ≈ $120,000 (rounded depending on assumed net investment)