A project will produce cash inflows of 1750 a year for four

A project will produce cash inflows of $1,750 a year for four years. The project initially costs $10,600 to get started. In year five, the project will be closed and as a result should produce a cash inflow of $8,500. What is the net present value of this project if the required rate of return is 14.75%?

Solution

Calculation of Net Present Value of the Project

NPV = PV of all cash flow - Initial investment

=1750*PVAF@14.75%,4Years + 8500*PVF@14.75%,Year5 - 10,600

=1750*2.869 +8500*.5026-10,600

=5021+4272-10,600

= -1307