What is the net present value (NPV) of a project that has the following cash flows?...
What is the net present value (NPV) of a project that has the following cash flows? The required return is 12.0%.
| Year | Cash Flow |
| 0 | $ (14,000) |
| 1 | $ 3,000 |
| 2 | $ 3,000 |
| 3 | $ 3,000 |
| 4 | $ 3,000 |
| 5 | $ 3,000 |
| 6 | $ 3,000 |
Homework Answers
The NPV of a project is the PV of the outflows minus the PV of the inflows. Since the cash inflows are an annuity, the equation for the NPV of this project at an 9 percent required return is:
NPV = -$14,000 + $3,000(PVIFA12%, 6)
NPV = -$1,665.78
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What is the net present value (NPV) of a project that has the
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