Design Quilters is considering a project with the following cash flows:
Initial Outlay = $126,000

If the appropriate discount rate is 11.5%,compute the NPV of this project.
A) -$14,947
B) $2,892
C) $7,089
D) $41,000

Question

Design Quilters is considering a project with the following cash flows:
Initial Outlay = $126,000

If the appropriate discount rate is 11.5%,compute the NPV of this project.
A) -$14,947 
B) $2,892 
C) $7,089 
D) $41,000

Quizplus · Accepted Answer

To calculate the NPV, we need to discount each cash flow to present value and then add them up. Using a financial calculator, we can find that the present value of the cash inflows is $133,089. Subtracting the initial outlay of $126,000, we get an NPV of $7,089. Therefore, Choice C is the best choice as it has a positive NPV and is greater than the other options.

Design Quilters Is Considering a Project with the Following Cash