Homework SourseWhat is the net present value of a project with the followin
What is the net present value of a project with the following cash flows if the discount rate is 13.6%?
Year 0 -$63,600
Year 1 18200
Year 2 34500
Year 3 35900
What is the net present value of a project with the following cash flows if the discount rate is 13.6%?
Year 0 -$63,600
Year 1 18200
Year 2 34500
Year 3 35900
Year 0 -$63,600
Year 1 18200
Year 2 34500
Year 3 35900
Solution
The net present value = Present Value of Cash Inflows - Present Value of Cash Outflows
= [ $ 18,200 * 1/(1.136)^1 + $ 34,500 * 1/(1.136)^2 +$ 35,900 * 1/(1.136)^3 ] -$ 63,600
= $ 67,243.38 - $ 63,600
= $ 3,643.38
Hence, the correct answer is $ 3,643.38
