A given project requires a $30,000 investment and is expected to generate end-of-period annual cash inflows as follows: $$\begin{array} { c c c c }
\text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Total } \
\hline \$ 12,000 & \$ 8,000 & \$ 10,000 & \$ 30,000
\end{array}$$ Assuming a discount rate of 10%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below:
$$\begin{array} { c c c }
i = 10 \% & i = 10 \% & i = 10 \% \
n = 1 & n = 2 & n = 3 \
\hline .9091 & .8264 & .7513
\end{array}$$
A)$0.00
B)$21,000.00
C)($7,461.00)
D)$25,033.32
E)($4,966.68)

Question

A given project requires a $30,000 investment and is expected to generate end-of-period annual cash inflows as follows: $$\begin{array} { c c c c } 
\text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Total } \
\hline \$ 12,000 & \$ 8,000 & \$ 10,000 & \$ 30,000
\end{array}$$ Assuming a discount rate of 10%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below:
$$\begin{array} { c c c } 
i = 10 \% & i = 10 \%  & i = 10 \%  \
n = 1 & n = 2 & n = 3 \
\hline .9091 & .8264 & .7513
\end{array}$$
A)$0.00
B)$21,000.00
C)($7,461.00)
D)$25,033.32
E)($4,966.68)

Quizplus · Accepted Answer

The NPV is calculated by discounting each cash inflow and subtracting the initial investment: NPV = ($12,000 * 0.9091) + ($8,000 * 0.8264) + ($10,000 * 0.7513) - $30,000 = $10,909.20 + $6,611.20 + $7,513.00 - $30,000 = ($4,966.68).

A Given Project Requires a $30,000 Investment and Is Expected