A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is approximately
A) $20,920
B) $26,160
C) $49,840
D) $70,920
E) $106,990

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting each cash flow at the cost of capital and summing them up, then subtracting the initial investment. The NPV is approximately $20,920.

A Capacity Alternative Has an Initial Cost of $50,000 and Cash