What is the Net Present Value of this project at a 5% cost of capital? Assume the initial investment is made today (on T0) and the other cash flows take place at the end of each year. $$\begin{array} { | l | c | c | l | l | }
\hline \text { T0 } & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \
\hline - 8,000 & 6,000 & 4,000 & 1,000 & 1,000 \
\hline
\end{array}$$

Question

What is the Net Present Value of this project at a 5% cost of capital? Assume the initial investment is made today (on T0) and the other cash flows take place at the end of each year. $$\begin{array} { | l | c | c | l | l | } 
\hline \text { T0 } & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \
\hline - 8,000 & 6,000 & 4,000 & 1,000 & 1,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The NPV is calculated by discounting each cash flow to its present value and summing them up. NPV = -8000 + 6000/(1.05) + 4000/(1.05^2) + 1000/(1.05^3) + 1000/(1.05^4) = 3029.

What Is the Net Present Value of This Project at a 5