Charles Henri is considering investing $37,800 in a project that is expected to provide him with cash inflows of $11,600 at the end of each of the first two years and $20,000 at the end of the third year.What is the project's NPV at a discount rate of 0 percent? At 5 percent? At 10 percent?
A)$0; $1,045.91; -$2,641.47
B)$4,468.39; $38.29; -$2,784.08
C)$5,400; $1,045.91; -$2,641.47
D)$5,400; $417.92; -$3,406.10
E)$4,468.39; $38.29; -$2,641.47

Question

Quizplus · Accepted Answer

At a 0% discount rate, the NPV is simply the sum of cash inflows minus the initial investment: $11,600 + $11,600 + $20,000 - $37,800 = $5,400. At a 5% discount rate, the NPV is calculated using the formula for NPV with each cash flow discounted back to present value, resulting in $1,045.91. At a 10% discount rate, the NPV is similarly calculated, resulting in -$2,641.47.

Charles Henri Is Considering Investing $37,800 in a Project That