Red Lake Mines Inc. is considering adoption of a new project requiring a net investment of $10 million. The project is expected to generate 5 years of net cash inflows of $5 million per year. In the project's sixth and final year, it is expected to have a net cash outflow of $1 million. What is the project's net present value, using a discount rate of 12%?
A) about $8.52 million
B) about $8.00 million
C) about $7.52 million
D) None of these are correct

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting each cash flow at 12% and summing them. The NPV is approximately $7.52 million.