A certain project will cost $50,000 and is expected to produce cash flows of $15,563 for the next seven years. The appropriate cost of capital is 15%. Calculate the project's NPV, rounding
Your answer to the nearest dollar.
A)+$58,941
B)+$14,748
C)-$36,467
D)+$64,748

Question

Quizplus · Accepted Answer

The Net Present Value (NPV) is calculated by discounting the future cash flows back to their present value and then subtracting the initial investment. Using the formula for NPV: NPV = $\sum \frac{CF_t}{(1+r)^t} - Initial Investment$, where $CF_t$ is the cash flow in year $t$, $r$ is the discount rate (15% or 0.15 in this case), and the initial investment is $50,000. Calculating the NPV for each of the 7 years and subtracting the initial investment gives an NPV of approximately +$14,748.

A Certain Project Will Cost $50,000 and Is Expected to Produce