Suppose a company has an investment that requires an after-tax incremental cash outlay of $12,000 today.It estimates that the expected future after-tax cash flows associated with this investment are $5,000 in years 1 and 2, and $8,000 in year 3.Using a 12.0% discount rate, determine the project's NPV.

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting the future cash flows to their present value and subtracting the initial investment. The NPV is: NPV = -12,000 + (5,000 / (1+0.12)^1) + (5,000 / (1+0.12)^2) + (8,000 / (1+0.12)^3) = $2,144.50.

Suppose a Company Has an Investment That Requires an After-Tax