A 6-year project has a zero NPV with sales of $5 million and a discount rate of 8%.The annual cash inflows are equal to 10% of sales minus $300,000.What was the initial investment in the project assuming that none of the investment is recoverable when the project ends?
A) $416,667
B) $924,576
C) $1,016,678
D) $2,311,450

Question

Quizplus · Accepted Answer

Investment = [($5m × 0.10) − $300,000]{(1 / 0.08) − [1 / 0.08(1.08⁶)]} = $924,576

A 6-Year Project Has a Zero NPV with Sales of $5