A project requires a $28,000 investment and is expected to generate end-of-period annual cash inflows as follows: $$\begin{array} { l c c }
\text { Year 1 } & \text { Year 2 } & \text { Year 3 } \
\$ 12,000 & \$ 13,000 & \$ 12,000
\end{array}$$ Assuming a discount rate of 10%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below.
$$\begin{array} { c c c }
= 10 \% & i = 10 \% & i = 10 \% \
n = 1 & n = 2 & n = 3 \
0.9091 & 0.8264 & 0.7513
\end{array}$$

Question

A project requires a $28,000 investment and is expected to generate end-of-period annual cash inflows as follows: $$\begin{array} { l c c } 
\text { Year 1 } & \text { Year 2 } & \text { Year 3 } \
\$ 12,000 & \$ 13,000 & \$ 12,000
\end{array}$$ Assuming a discount rate of 10%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below.
$$\begin{array} { c c c } 
= 10 \% & i = 10 \% & i = 10 \% \
n = 1 & n = 2 & n = 3 \
0.9091 & 0.8264 & 0.7513
\end{array}$$

Quizplus · Accepted Answer

The NPV is calculated by discounting each cash inflow and subtracting the initial investment: NPV = ($12,000 * 0.9091) + ($13,000 * 0.8264) + ($12,000 * 0.7513) - $28,000 = $10,909.20 + $10,743.20 + $9,015.60 - $28,000 = $2,668.00.

A Project Requires a $28,000 Investment and Is Expected to Generate