Question

Please use financial calculator to assist in showing the work.

A project's initial cost is $8,500. The project will produce cash inflows of $4,200 a year for 4 years with a final cash inflow of $6,700 in year 5. What is the net present value of this project if the required rate of return is 15 percent?

Answer 1

answer:- NET PRESENT VALUE =$6821.99

Answer 2

Step-by-Step Calculation (Using Financial Calculator Logic):

1. Initial Cost (Outflow):

• Today (Year 0): $-\mathrm{\$}8,500$ (negative because it’s an expense).

2. Annual Cash Inflows (Years 1–4):

• PMT = $4,200, N = 4, I/Y = 15%.

• $4,200 each year for 4 years.

• 
  

• Calculator Input:

• Present Value (PV) of Annuity:

  $$P{V}_{\text{Years 1–4}}=4,200\times \left(\frac{1-(1+0.15{)}^{-4}}{0.15}\right)=4,200\times 2.8550=\mathrm{\$}11,991.$$

3. 
   

4. Final Cash Inflow (Year 5):

• $6,700 (one-time payment in Year 5).

• Present Value (PV) of Single Sum:

  $$P{V}_{\text{Year 5}}=\frac{6,700}{(1+0.15{)}^5}=\frac{6,700}{2.0114}=\mathrm{\$}3,331.$$

5. Total Present Value of Inflows:

   $$P{V}_{\text{Total Inflows}}=P{V}_{\text{Years 1–4}}+P{V}_{\text{Year 5}}=\mathrm{\$}11,991+\mathrm{\$}3,331=\mathrm{\$}15,322.$$

7. Net Present Value (NPV):

   $$NPV=P{V}_{\text{Total Inflows}}-\text{Initial Cost}=\mathrm{\$}15,322-\mathrm{\$}8,500=\mathrm{\$}6,822.$$

8.  

Answer:
             The correct NPV is $6,822.