An investment project requires an outlay of $100,000, and is expected to generate annual cash inflows of $28,000 for the next 5 years. The cost of capital is 12 percent. Determine a net present value for the project.

Question

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the future cash inflows back to their present value and subtracting the initial investment. Using the formula for NPV and a discount rate of 12%, the calculation yields an NPV of approximately $940.

An Investment Project Requires an Outlay of $100,000, and Is