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 three 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 to solve for NPV is NPV = −Initial Outlay + (Cash inflow year 1 / (1+r)^1) + (Cash inflow year 2 / (1+r)^2) + (Cash inflow year 3 / (1+r)^3)
Plugging in the numbers, we get: NPV = −$30,000 + $15,000/(1.1)^1 + $20,000/(1.1)^2 + $30,000/(1.1)^3

Which of the Following Is a Correct Equation to Solve