Compute the NPV statistic for Project U given the following cash flows and if the appropriate cost of capital is 9 percent. Project U
A) $201.69
B) $273.82
C) $383.63
D) $397.21

Question

Compute the NPV statistic for Project U given the following cash flows and if the appropriate cost of capital is 9 percent. Project U 
A) $201.69 
B) $273.82 
C) $383.63 
D) $397.21

Quizplus · Accepted Answer

Using the formula for NPV, and discounting each cash flow at a 9% cost of capital:
NPV = -$1,000 + ($200 / 1.09) + ($400 / 1.09^2) + ($300 / 1.09^3) + ($500 / 1.09^4)
NPV = -$1,000 + $183.49 + $343.83 + $238.85 + $520.58
NPV = $286.75
Therefore, the NPV statistic for Project U is $286.75. The best choice is C, which is the closest option to $286.75.

Compute the NPV Statistic for Project U Given the Following