Consider the following project:
Initial outlay = $15 million
Year 1 expected cash flow = $5 million
Year 2 expected cash flow = $6 million
Year 3 expected cash flow = $7 million
Project cost of capital = 8%
The net present value of this project is closest to:

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting each cash flow at the project's cost of capital and subtracting the initial outlay. NPV = -15 + (5/1.08) + (6/1.08^2) + (7/1.08^3) ≈ $0.33 million.

Consider the Following Project