A project has an initial cost of $40,000, expected net cash inflows of $11,000 per year for 6 years, and a cost of capital of 9%

Finance Dec 10, 2020

A project has an initial cost of $40,000, expected net cash inflows of $11,000 per year for 6 years, and a cost of capital of 9%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.

Expert Solution

NPV is $9,345.10
Statement showing Cash flows
Particulars	Time	PVf 9%	Amount	PV
Cash Outflows	-	1.00	(40,000.00)	(40,000.00)
PV of Cash outflows = PVCO				(40,000.00)
Cash inflows	1.00	0.917431	11,000.00	10,091.74
Cash inflows	2.00	0.841680	11,000.00	9,258.48
Cash inflows	3.00	0.772183	11,000.00	8,494.02
Cash inflows	4.00	0.708425	11,000.00	7,792.68
Cash inflows	5.00	0.649931	11,000.00	7,149.25
Cash inflows	6.00	0.596267	11,000.00	6,558.94
PV of Cash Inflows =PVCI				49,345.10
NPV= PVCI - PVCO				9,345.10

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