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A project has an initial outlay of $3,559. It has a single payoff at the end...

A project has an initial outlay of $3,559. It has a single payoff at the end of year 2 of $7,509. What is the net present value (NPV) of the project if the company’s cost of capital is 13.33 percent? Round the answer to two decimal places.

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Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=7509/1.1333^2

=7509*0.778592511

=$5846.45

NPV=Present value of inflows-Present value of outflows

=$5846.45-$3559

=$2287.45(Approx).

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