Question

Living Colour Co. has a project available with the following cash flows:

Year Cash Flow

0 −$31,870

1 8,570

2 10,370

3 14,960

4 16,410

5 11,540

If the required return for the project is 9.9 percent, what is the project's NPV?

Answer 1

Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$31,870. Indicate the initial cash flow by a negative sign since it is a cash outflow.  
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the required return of 9.9%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.  

Net present value at 9.9% required return is $14,231.42.

In case of any query, kindly comment on the solution.