Question

Blink of an Eye Company is evaluating a 5-year project that will provide cash flows of $35,300, $60,030, $62,370, $60,150, and $43,170, respectively. The project has an initial cost of $155,360 and the required return (discount rate) is 8.2 percent. What is the project's NPV?

a. $50,774.30
b. $15,913.23
c. $19,565.11
d. $17,504.56
e. $24,758.93

Answer 1

Answer:

a. $50,774.30

Explanation:

Present value of inflows = Cash inflow * Present value of discounting factor(rate%,t ime period)

Present value of inflows = $35,300/1.082 + $60,030/(1.082)^2 + $62,370/(1.082)^3 + $60,150/(1.082)^4 + $43,170/(1.082)^5

Present value of inflows = $32,624.77 + $51,275.96 + $49,237.27 + $43,886.06 + $29,110.24

Present value of inflows =$206,134.30

Project NPV = Present value of inflows - Present value of outflows

Project NPV = $206,134.30 - $155,360

Project NPV = $50,774.30