A certain project will cost a firm 5000 today The project is

A certain project will cost a firm $5,000 today.  The project is not expected to produce any cash flows until the second year, at which point it is expected to produce $6,200.  No other cash flows are anticipated.  If the appropriate cost of capital is15%, what is this project?s NPV?  Round your answer to the nearest dollar

+$391

-$1,852

-$312

+$5,836

Solution

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=$6200/1.15^2

=(6200*0.756143667)

=$4688.09

NPV=Present value of inflows-Present value of outflows

=$4688.09-$5000

=-$312(Approx)(Negative)(C).