Figure 1
A project requires an investment of £90,000 in equipment. Annual cash inflows of £15,000 are expected to occur for the next ten years. No salvage value is expected.
-Refer to Figure 1. If the cash inflows occur at the end of each year, the net present value of the project using a 12 percent discount rate would be

Question

Quizplus · Accepted Answer

To calculate net present value (NPV), we need to discount all cash inflows at the given rate of 12 percent. Using a financial calculator or Excel, we can find the NPV to be -£5,250. This means that the project is expected to generate a negative return, so it is not a good investment option. Therefore, the best choice is option C, which indicates a negative NPV.

Figure 1 A Project Requires an Investment of £90,000 in Equipment. Annual