# Net Present Value and Washington State University

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Washington State University Finance 325

Practice Problems
1. What is the net present value of a project with the following cash flows and a required return of 12 percent? Year 0 1 2 3 Cash Flow -\$28,900 \$12,450 \$19,630 \$ 2,750

2.

What is the net present value of a project that has an initial cash outflow of \$12,670 and the following cash inflows? The required return is 11.5 percent. Year 1 2 3 4 Cash Inflows \$4,375 \$ 0 \$8,750 \$4,100

3.

A project will produce cash inflows of \$1,750 a year for four years. The project initially costs \$10,600 to get started. In year five, the project will be closed and as a result should produce a cash inflow of \$8,500. What is the net present value of this project if the required rate of …show more content…

The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating a \$25,000 after-tax cash flow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 14 percent?

Answer Keys 1. NPV = −\$28,900 +
\$12,450 \$19,630 \$2,750 ; NPV = -\$177.62