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4 July, 21:25

You are considering a project with projected annual cash inflows of $32,200, $41,800, $22,900 for the next three years, respectively. What is the value of the project today at a discount rate of 14 percent

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  1. 4 July, 21:36
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    The value of the project today is $75,866

    Explanation:

    Net present value is the Net value all cash inflows and outflows in present value term. All the cash flows are discounted using a required rate of return.

    Years 1 2 3

    Cash Flows $32200 $41800 $22,900

    Discount Factor 14% 0.8772 0.7695 0.6750

    Present Values $28,245.61 $32,163.74 $15,456.85

    Net present value = $75,866.20
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