Use the following setup for the next question.
A publisher is deciding whether or not to invest in a new printer.The printer would cost $900,and would increase the cash flows in year 1 by $500 and in year 3 by $800.Cash flows do not change in year 2.If the interest rate is 12%
-What is the net present value of the investment?
A)$115.85
B)$1055.59
C)$1076.56
D)$346.78

Question

​Use the following setup for the next question.
A publisher is deciding whether or not to invest in a new printer.The printer would cost $900,and would increase the cash flows in year 1 by $500 and in year 3 by $800.Cash flows do not change in year 2.If the interest rate is 12%
-​What is the net present value of the investment?
A)​$115.85
B)$1055.59
C)$1076.56
D)​$346.78

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the future cash flows back to their present value and subtracting the initial investment. The formula for NPV is: NPV = (Cash Flow in Year 1 / (1+r)^1) + (Cash Flow in Year 3 / (1+r)^3) - Initial Investment, where r is the interest rate. Plugging in the given values: NPV = ($500 / (1+0.12)^1) + ($800 / (1+0.12)^3) - $900 = $446.43 + $570.42 - $900 = $116.85 (rounded to two decimal places).

​Use the Following Setup for the Next Question

Use the Following Setup for the Next Question