What is the net present value for a project that costs $8000 now with the below anticipated...

Question:

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%?

CF1 2000
CF2 3000
CF3 4000
CF4 2000

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:


Answer:

The net present value of the project is $295.45.

Explanation:

As per the data provided, the net present value is computed in the following format:

Event Cash flow PVAF of $1 @ 12% Present value
CF1 2000 0.89286 $1,785.72
CF2 3000 0.79719 $2,391.57
CF3 4000 0.71178 $2,847.12
CF4 2000 0.63552 $1,271.04
Total amount (A) $8,295.45
Amount Invested (B) $8,000
Net present value (A - B) $295.45

Learn more about this topic:

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How to Calculate Net Present Value: Definition, Formula & Analysis

from Financial Accounting: Help and Review

Chapter 5 / Lesson 20
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