Question) The initial cost of an equipment is $5000 for this project. Below are the cash flows for 3 years:
| Year 1 | Year 2 | Year 3 | |
| Cash Flows | 1000 | 1000 | 6800 |
If the Discount Rate is 15% and the Internal Rate of Return is 20%, calculate the NPV of this project.
| Project | ||||
| Discount rate | 0.15 | |||
| Year | 0 | 1 | 2 | 3 |
| Cash flow stream | -5000 | 1000 | 1000 | 6800 |
| Discounting factor | 1 | 1.15 | 1.3225 | 1.520875 |
| Discounted cash flows project | -5000 | 869.5652 | 756.1437 | 4471.11 |
| NPV = Sum of discounted cash flows | ||||
| NPV Project = | 1096.82 | |||
| Where | ||||
| Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||
| Discounted Cashflow= | Cash flow stream/discounting factor | |||
Question) The initial cost of an equipment is $5000 for this project. Below are the cash...