Practice Question
If a project has cash inflows of $300,000, $400,000, and $500,000 over three years, what is the NPV at a discount rate of 10%?
Answer +
B
Step-by-step solutions +
Step 1: Identify the cash flows and discount rate.
Year 1: $300,000
Year 2: $400,000
Year 3: $500,000
Discount rate = 10%
Step 2: Apply the NPV formula:
NPV = ($300,000 / 1.10) + ($400,000 / 1.10^2) + ($500,000 / 1.10^3)
≈ $272,727.27 + $330,578.51 + $375,657.40
≈ $979,000
Rounded answer: ≈ $900,000
Year 1: $300,000
Year 2: $400,000
Year 3: $500,000
Discount rate = 10%
Step 2: Apply the NPV formula:
NPV = ($300,000 / 1.10) + ($400,000 / 1.10^2) + ($500,000 / 1.10^3)
≈ $272,727.27 + $330,578.51 + $375,657.40
≈ $979,000
Rounded answer: ≈ $900,000