A projected project requires an investment of $100,000 and has an expected life of four years. The project expects annual cash flows of $40,000 in year 1, $48,000 in year 2, $76,000 in year 3 and $56,000 in year 4. If the company has a discount rate of 8%, what is the net present value (ignoring income taxes)?

Question

Quizplus · Accepted Answer

($40,000 x .92593) + ($48,000 x .85734) + ($76,000 x .79383) + ($56,000 x .73503) - $100,000 = $79,682
(year 1 cash x PVIF, n=1, i=8%) + (year 2 cash x PVIF, n=2, i=8%) + (year 3 cash x PVIF, n=3, i=8%) +(year 4 cash x PVIF, n=4, i=8%) - cost

A Projected Project Requires an Investment of $100,000 and Has