Which of the following is a correct equation to solve for the NPV of the project that has an initial outlay of $30,000, followed by incremental cash inflows in the next 3 years of $15,000, $20,000, and $30,000? Assume a discount rate of 10%.
A) NPV = - $30,000 + $15,000(1.10)1 + $20,000(1.10)2 + $30,000(1.10)3
B) NPV = - $30,000 + $15,000/(1.10)1 + $20,000/(1.10)2 + $30,000/(1.10)3
C) NPV = - $30,000 + $15,000/(1.01).10 + $20,000/(1.02).10 + $30,000/(1.03).10
D) NPV = - $30,000 + $15,000/(1.1).10 + $20,000(1.2).10 + $30,000(1.3).10

Question

Quizplus · Accepted Answer

The correct equation for calculating NPV involves discounting future cash inflows back to their present value using the formula NPV = -Initial Investment + Σ(Cash Inflow / (1 + r)^t), where r is the discount rate and t is the time period. Option B correctly applies this formula with a 10% discount rate.

Which of the Following Is a Correct Equation to Solve