Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 12 percent.
Project X
$$\begin{array} { c c c c c c }
\text { Time } & 0 & 1 & 2 & 3 & 4 \
\text { Cash Flow } & - \$ 15,000 & \$ 6,000 & \$ 10,000 & \$ 12,000 & - \$ 1,000
\end{array}$$
A) $6,234.93
B) $7,505.96
C) $8,417.80
D) $37,505.96

Question

Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 12 percent.
Project X
$$\begin{array} { c c c c c c } 
\text { Time } & 0 & 1 & 2 & 3 & 4 \
\text { Cash Flow } & - \$ 15,000 & \$ 6,000 & \$ 10,000 & \$ 12,000 & - \$ 1,000
\end{array}$$
A) $6,234.93
B) $7,505.96
C) $8,417.80
D) $37,505.96

Quizplus · Accepted Answer

The NPV is calculated as the sum of the present values of the cash flows, discounted at the appropriate cost of capital. The present value of a cash flow is calculated as the cash flow divided by (1 + r)^t, where r is the cost of capital and t is the time period.In this case, the NPV is calculated as follows:NPV = -15,000/(1.12)^0 + 6,000/(1.12)^1 + 10,000/(1.12)^2 + 12,000/(1.12)^3 - 1,000/(1.12)^4= -15,000 + 5,357.14 + 8,033.07 + 9,841.16 - 714.29= $6,234.93

Compute the NPV Statistic for Project X Given the Following