What is the NPV for the following project if its cost of capital is 12 percent and its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3 and ($1,300,000) in year 4?

Question

Quizplus · Accepted Answer

Using the NPV formula: 
NPV = -Initial Investment + PV of Year 1 Cash Flow + PV of Year 2 Cash Flow + PV of Year 3 Cash Flow + PV of Year 4 Cash Flow 
NPV = -$5,000,000 + $1,607,142.86 + $1,553,997.31 + $1,156,718.23 - $627,694.02 
NPV = -$1,494,336.62 
Therefore, the NPV for the project is -$1,494,336 which means the project is not profitable and should be rejected.

What Is the NPV for the Following Project If Its