Practice Question
If a project has cash inflows of $30,000, $40,000, and $50,000 over three years, what is the NPV if the discount rate is 8%?
Answer +
C
Step-by-step solutions +
Step 1: Identify the cash flows and discount rate.
Year 1: $30,000
Year 2: $40,000
Year 3: $50,000
Discount rate = 8%
Step 2: Apply the NPV formula:
NPV = ($30,000 / 1.08) + ($40,000 / 1.08^2) + ($50,000 / 1.08^3)
≈ $27,777.78 + $34,293.55 + $39,690.90
≈ $101,762.23
Rounded answer: ≈ $100,000
Year 1: $30,000
Year 2: $40,000
Year 3: $50,000
Discount rate = 8%
Step 2: Apply the NPV formula:
NPV = ($30,000 / 1.08) + ($40,000 / 1.08^2) + ($50,000 / 1.08^3)
≈ $27,777.78 + $34,293.55 + $39,690.90
≈ $101,762.23
Rounded answer: ≈ $100,000