The future cash flows of a stand-alone capital project follow: $\begin{array}{lllll}
\text { Year } &0&1&2&3\\text { Cash flow }&(\$5,000)&\$2,500&\$2,500&\$2,500
\end{array}$ If the company's cost of capital is 14%, what is the approximate NPV of the project?

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting each cash flow at the company's cost of capital (14%) and summing them. The NPV is approximately $804.

The Future Cash Flows of a Stand-Alone Capital Project Follow Year 0123 Cash flow ($5,000)$2,500$2,500$2,500\begin{array}{lllll}\text { Year } &0&1&2&3\\\text { Cash flow }&(\$5,000)&\$2,500&\$2,500&\$2,500\end{array} Year Cash flow ​0($5,000)​1$2,500​2$2,500​3$2,500​

The Future Cash Flows of a Stand-Alone Capital Project Follow $\begin{array}{lllll}\text { Year } &0&1&2&3\\\text { Cash flow }&(\$5,000)&\$2,500&\$2,500&\$2,500\end{array}$