2 answers

1. Calculate the net present value (NPV) of a project with the following stream of CFs:...

Question:

1. Calculate the net present value (NPV) of a project with the following stream of CFs: C, through Cls are all equal to $800,
1. Calculate the net present value (NPV) of a project with the following stream of CFs: C, through Cls are all equal to $800, C19 = $300, and C20 = -$800 (notice the minus). The initial investment is $4000. The appropriate discount rate is 10%.

Answers

Provided,

discount rate = 10%

Cash flows = Year 1 to 18 = $800

Year 19 = $300

Year 20 = -$800

Initial investment at Year 0 = $4,000

We can compute the NPV of above project with following equation:

NPV = 800 *P/A0.1.18) +300* P/F(0.1, 19) +(-800) * P/F0.1. 20 - 4,000

(1 +0.1)18 - 1 NPV = 800 * 1 0.1*(1 + 0.1)18 300 (-800) (1 + 0.1)197 (1 + 0.1)20

NPV = 800*8.20141210090786+49.0523972479673-118.914902419315-4,000

NPV = 6561.12968072629 + 49.0523972479673 - 118.914902419315 - 4.000

NPV = 6491.26717555494 – 4.000

NPV = 2491.26717555494

NPV = $2.491.27

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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5000

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