Frameworks,Inc.is considering a five-year project that has an initial after-tax outlay or after-tax cost of $80,000.The respective future cash inflows from its project for years 1,2,3,4 and 5 are: $15,000,$25,000,$35,000,$45,000 and $55,000.Frameworks uses the net present value method and has a discount rate of 9%.Will Frameworks accept the project?
A)Frameworks accepts the project because the NPV is $129,455.25.
B)Frameworks accepts the project because the NPV is 79,455.25.
C)Frameworks accepts the project because the NPV is $49,455.25.
D)Frameworks accepts the project because the NPV is less than zero.

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting the future cash inflows at the given discount rate and subtracting the initial outlay. The NPV is positive, indicating the project is acceptable.