Question on net present value

label Business & Finance
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

A project has an initial outlay of $1,032. It has a single payoff at the end of year 8 of $9,096. What is the net present value (NPV) of the project if the company’s cost of capital is 8.76 percent?

Round the answer to two decimal places.

Oct 3rd, 2015

Thank you for the opportunity to help you with your question!

PV = C/(1+r)^n

This is the formula for present value

C = is cash outflow

r = interest rate

n= # of periods

so for this the formula is $1,032/(1+.0876)^8

=$1,032/(1.0876)^8

=$1,032/1.95773

= $527.14

Please let me know if you need any clarification. I'm always happy to answer your questions.
Sep 22nd, 2015

Sorry i misread the question

the formula should be 

$9,096/(1.0876)^8

=4,646.19

then take the 4,646.19 and subtract the $1,032 = $3,614.19= Net Present Value


Peter

Sep 22nd, 2015

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Oct 3rd, 2015
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