Use the information for the question(s) below.
The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some
new machinery costing $450,000. The Sisyphean Company expects cash inflows from this project as
detailed below:
$\begin{array} { c c c c }
\hline \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \
\hline \$ 200,000 & \$ 225,000 & \$ 275,000 & \$ 200,000 \
\hline
\end{array}$
The appropriate discount rate for this project is 16%.
-The net present value (NPV) for this project is closest to?

Question

Use the information for the question(s) below.
The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some
new machinery costing $450,000. The Sisyphean Company expects cash inflows from this project as
detailed below:
$\begin{array} { c c c c } 
\hline \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \
\hline \$ 200,000 & \$ 225,000 & \$ 275,000 & \$ 200,000 \
\hline
\end{array}$
The appropriate discount rate for this project is 16%.
-The net present value (NPV) for this project is closest to?

Quizplus · Accepted Answer

The NPV is calculated as the present value of the cash inflows minus the initial investment. The present value of the cash inflows is calculated as the sum of the present values of each year's cash inflow. The present value of each year's cash inflow is calculated as the cash inflow divided by (1 + discount rate)^year.The NPV is calculated as follows:NPV = -Initial investment + Present value of cash inflowsNPV = -$450,000 + $200,000/(1 + 0.16)^1 + $225,000/(1 + 0.16)^2 + $275,000/(1 + 0.16)^3 + $200,000/(1 + 0.16)^4NPV = -$450,000 + $172,414 + $189,660 + $211,250 + $140,946NPV = $176,270

Use the Information for the Question(s) Below The Appropriate Discount Rate for This Project Is 16