What is the net present value of a project that requires an initial investment of $76,000 and produces net cash flows of $22,000 per year for 7 years? Assume the discount rate is 15 percent.

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Quizplus · Accepted Answer

The net present value (NPV) of a project is calculated by discounting the future cash flows back to their present value and then subtracting the initial investment. Using the formula for NPV and a discount rate of 15%, the calculation for this project would be: NPV = ($22,000 / 1.15^1) + ($22,000 / 1.15^2) + ... + ($22,000 / 1.15^7) - $76,000. This calculation results in an NPV of approximately $15,520, making option B the correct answer.

What Is the Net Present Value of a Project That