What is the net present value of a project that has an initi

What is the net present value of a project that has an initial cash outflow of $12,670 and the following cash inflows? The required return is 12.5%.
  

  

Year Cash Inflows $4,375 $8,750 $4,100 4

Solution

Net Present Value = PV of inflows - PV of outflows

= (3888.89+6145.40+2559.61) - 12670

= 12593.90 - 12670

= -76.10

It is not advisable to accept the project since it has a negative NPV.

*You can use the equation 1/(1+i)^n to find PVF using calculator

Formula to calculate PV in excel is as follows

\"=PV(interest rate,Year,0,cashflow)\"

Year	Cashflow	PVF@12.5%*	Cashflow*PVF
0	(12,670)	1.000	(12,670.00)
1	4,375	0.889	3,888.89
2	-	0.790	-
3	8,750	0.702	6,145.40
4	4,100	0.624	2,559.61