A Kshs.2.2 million investment will result in the following year end- cash flows :YearCash flow1Kshs 1.6 millionKshs 800,0003Kshs.1.3 million4Kshs.1.9 millionUsing an 8% cost of capital, the project's net present value (NPV) is closest to:2.

Net Present Value is the difference between the present value of cash inflows and cash outflows.

A Kshs.2.2 million investment will result in the following year end- c Year Cash flow 1 Kshs 1.6 million 2 Kshs 800,000 Kshs.1.3 million 4 Kshs.1.9 million Using an 8% cost of capital, the project's net present value (NPV) is

A Kshs.2.2 million investment will result in the following year end- c Year Cash flow 1 Kshs 1.6 million 2 Kshs 800,000 Kshs.1.3 million 4 Kshs.1.9 million Using an 8% cost of capital, the project's net present value (NPV) is

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 14P

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

A Kshs.2.2 million investment will result in the following year end- cash flows :
Year
Cash flow
1
Kshs 1.6 million
Kshs 800,000
3
Kshs.1.3 million
4
Kshs.1.9 million
Using an 8% cost of capital, the project's net present value (NPV) is closest to:
2.

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