What is the net present value for a project that costs $8000 now with the below anticipated annual cash streams and a cost of 12%?
Investment's Net Present Value:
An investment's net present value represents the difference between the present value of the cash flows that are generated by the investment and the initial cash outlay spent on the investment. If the investment's NPV is not positive, then it should not be taken up. An investment with a positive NPV has the capability to enhance the value and wealth of the firm.
Answer and Explanation:
The net present value of the project is $295.45.
As per the data provided, the net present value is computed in the following format:
|Event||Cash flow||PVAF of $1 @ 12%||Present value|
|Total amount (A)||$8,295.45|
|Amount Invested (B)||$8,000|
|Net present value (A - B)||$295.45|
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from Financial Accounting: Help and ReviewChapter 5 / Lesson 20