Calculate the Net Present Value for a project with the following cash flows: Year 0: ($5,000) Year 1: $10,000 Year 2: $10,000 Year3: ($2,000).The discount rate is 5%.
A) $19,209.75
B) $14,209.75
C) $18,840.25
D) $23,840.25
E) $12,350.00

Question

Quizplus · Accepted Answer

To calculate the net present value (NPV), we need to discount each cash flow to its present value and then sum them up.

Year 0: ($5,000) / (1 + 0.05)^0 = ($5,000)
Year 1: $10,000 / (1 + 0.05)^1 = $9,523.81
Year 2: $10,000 / (1 + 0.05)^2 = $9,070.29
Year 3: ($2,000) / (1 + 0.05)^3 = ($1,716.10)

NPV = ($5,000) + $9,523.81 + $9,070.29 - $1,716.10 = $14,877

Therefore, the correct answer is B, $14,209.75, which is the closest option to $14,877 within the given choices.

Calculate the Net Present Value for a Project with the Following