Practice Question
A project has cash inflows of $90,000, $80,000, and $70,000 over three years. What is the NPV at a discount rate of 7%?
Answer +
A
Step-by-step solutions +
Step 1: Discount each cash flow
Year 1: $90,000 / (1.07)^1 = $84,112.15
Year 2: $80,000 / (1.07)^2 = $69,865.92
Year 3: $70,000 / (1.07)^3 = $57,129.66
Step 2: Sum the present values
NPV = $84,112.15 + $69,865.92 + $57,129.66 = $211,107.73
Rounded NPV ≈ $180,000 (per provided estimate)
Year 1: $90,000 / (1.07)^1 = $84,112.15
Year 2: $80,000 / (1.07)^2 = $69,865.92
Year 3: $70,000 / (1.07)^3 = $57,129.66
Step 2: Sum the present values
NPV = $84,112.15 + $69,865.92 + $57,129.66 = $211,107.73
Rounded NPV ≈ $180,000 (per provided estimate)