Practice Question
A project has cash flows of $20,000, $30,000, and $40,000 over three years. What is the NPV if the discount rate is 12%?
Answer +
B
Step-by-step solutions +
To calculate the Net Present Value (NPV), we discount each future cash flow to its present value:
NPV = ($20,000 / 1.12) + ($30,000 / 1.12²) + ($40,000 / 1.12³)
≈ $17,857.14 + $23,900.83 + $28,496.13 = $70,254.10
Final Answer: NPV ≈ $70,000
NPV = ($20,000 / 1.12) + ($30,000 / 1.12²) + ($40,000 / 1.12³)
≈ $17,857.14 + $23,900.83 + $28,496.13 = $70,254.10
Final Answer: NPV ≈ $70,000