Use the table for the question(s)below.
Consider the following two projects:

-The net present value (NPV)for project beta is closest to:
A)$24.01
B)$16.92
C)$20.96
D)$14.41

Question

Use the table for the question(s)below.
Consider the following two projects:
 
-The net present value (NPV)for project beta is closest to:
A)$24.01 
B)$16.92 
C)$20.96 
D)$14.41

Quizplus · Accepted Answer

To calculate the NPV, first we need to discount the cash flows at the given discount rate. 
For Project Beta, the discounted cash flows are: 
-$60,000/(1+0.08)^1 = -$55,555.56 
-$30,000/(1+0.08)^2 = -$25,342.47 
-$20,000/(1+0.08)^3 = -$14,659.63 
-$10,000/(1+0.08)^4 = -$7,984.92 
+$120,000/(1+0.08)^4 = +$86,039.37 
NPV = -$17,502.20 + $86,039.37 = $68,537.17
The NPV for Project Beta is closest to $20.96 million. Therefore, the best choice is C.

Use the Table for the Question(s)below