A project has an anticipated stream of annual net receipts of $25,000. Its life is 10 years. No salvage value is expected at the end of the 10 years. If the price of the project is $150,000 and the applicable discount rate is 8%, the net present value of the project is $167,752.50

Question

Quizplus · Accepted Answer

The net present value formula is NPV = present value of cash inflows - initial investment. 
Using the formula, we get: 
NPV = ($25,000/0.08) x [1 - 1/(1+0.08)^10] - $150,000 
NPV = $167,752.50

Therefore, the given statement is false.

A Project Has an Anticipated Stream of Annual Net Receipts