The Jacobi Project requires an initial cash outlay of $75,000 and is expected to produce net cash flows of $20,000 at the end of each year of its 5-year life. If the required return on the project is
10%, what is its net present value? Round your answer to the nearest dollar.
A)$25,000
B)$62,582
C)$12,418
D)none of the above

Question

Quizplus · Accepted Answer

The net present value (NPV) of the Jacobi Project can be calculated using the formula for NPV = $\sum \frac{C_t}{(1+r)^t} - C_0$, where $C_t$ is the cash flow at time $t$, $r$ is the discount rate, and $C_0$ is the initial investment. Plugging in the values: NPV = $\frac{20,000}{(1+0.1)^1} + \frac{20,000}{(1+0.1)^2} + \frac{20,000}{(1+0.1)^3} + \frac{20,000}{(1+0.1)^4} + \frac{20,000}{(1+0.1)^5} - 75,000$. Calculating this gives an NPV different from the provided options, hence the correct choice is D, none of the above.

The Jacobi Project Requires an Initial Cash Outlay of $75,000