Practice Problem – NPV

Practice Question

Cases in Finance
Capital Budgeting
NPV
Short Answer

A project has cash flows of $20,000, $30,000, and $50,000 over three years. What is the NPV if the discount rate is 8%?

Answer +
B
Step-by-step solutions +
We are given no initial investment, so NPV = Present Value of cash inflows.

NPV = ($20,000 / 1.08) + ($30,000 / 1.08²) + ($50,000 / 1.08³)

≈ $18,518.52 + $25,720.16 + $39,690.13 = $63,928.81

Final Answer: NPV ≈ $66,000