NPV A project has an initial cost of $40,000, expected net cash inflows of $8,000 per year for 9 years, and a cost of

Question

NPV A project has an initial cost of $40,000, expected net cash inflows of $8,000 per year for 9 years, and a cost of capital of 12%. 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. $

Help In Homework · Accepted Answer

Project Discount rate 0.12 Year 0 1 2 3 4 5 6 7 8 9 Cash flow stream -40000 8000 8000 8000 8000 8000 8000 8000 8000 8000 Discounting factor 1 1.12 1.2544 1.404928 1.5735194 1.762342 1.973823 2.210681 2.475963 2.773079 Discounted cash flows project -40000 7142.857 6377.551 5694.242 5084.1446 4539.415 4053.049 3618.794 3231.066 2884.88 NPV = Sum of discounted cash flows NPV Project = 2626 Where Discounting factor = (1 + discount rate)^(Corresponding period in years) Discounted Cashflow= Cash flow stream/discounting factor

Why Choose Us?

0% AI Guarantee

24/7 Support

Plagiarism Free

Expert Tutors

100% Confidential

On-Time Delivery

NPV A project has an initial cost of $40,000, expected net cash inflows of $8,000 per year for 9 years, and a cost of capital of 12%

Expert Solution

Archived Solution

Project
Discount rate	0.12
Year	0	1	2	3	4	5	6	7	8	9
Cash flow stream	-40000	8000	8000	8000	8000	8000	8000	8000	8000	8000
Discounting factor	1	1.12	1.2544	1.404928	1.5735194	1.762342	1.973823	2.210681	2.475963	2.773079
Discounted cash flows project	-40000	7142.857	6377.551	5694.242	5084.1446	4539.415	4053.049	3618.794	3231.066	2884.88
NPV = Sum of discounted cash flows
NPV Project =	2626
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor