The NPV of an project with an initial investment of $1,000 that provides after-tax operating cash flows of $300 per year for four years where the firm's cost of capital is 15 percent is $143.51.

Question

Quizplus · Accepted Answer

The NPV calculation involves discounting each cash flow at the firm's cost of capital and summing them. The NPV for this scenario is calculated as follows: NPV = -1000 + (300/(1+0.15)^1) + (300/(1+0.15)^2) + (300/(1+0.15)^3) + (300/(1+0.15)^4), which results in a different value than $143.51.

The NPV of an Project with an Initial Investment of $1,000