Calculate the NPV of a 20-year project with a cost of $400,000 and annual cash flows of $50,000 in years 1-10 and $25,000 in years 11-20. The company's required rate of return is 10%.
A) ($33,547)
B) ($18,547)
C) $0
D) $18,547
E) $33,547

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting the cash flows at the required rate of return and subtracting the initial investment. The NPV is negative, indicating the project does not meet the required rate of return.

Calculate the NPV of a 20-Year Project with a Cost