Asked Jul 18, 2019

A project will produce cash inflows of $3,200 a year for 4 years with a final cash inflow of $5,700 in year 5. The project's initial cost is $9,500. What is the net present value of this project if the required rate of return is 16 percent? 


Expert Answer

Step 1

Calculation of NPV:

 Excel spread sheet:


Image Transcriptionclose

A B 1Initial cost S9,500 Cash inflow for 4 years In 5th year-Final cash inflow S3,200 2 $5,700 3 4 Rate of return 16% 5 Cash flow Present value factor@16% |Present value ($9,500.00) Years 6 1.0000 0 ($9,500) $3,200 $3,200 7 1 0.8621 $2,758.62 8 2 0.7432 $2,378.12 3 $3,200 0.6407 $2,050.10 10 $3,200 4 0.5523 $1,767.33 11 0.4761 5 $5,700 $2,713.84 12 Net present value (NPV) $2,168.02 13

Step 2

Excel workings:


Image Transcriptionclose

A 1 Initial cost 9500 Cash inflow for 4 years 3200 2 3 In 5th year-Final cash inflow 5700 Rate of return 0.16 4 5 Cash flow Present value factor@16% | Present value 9500 3200 3200 3200 3200 5700 Years 6 |=(1/1.16)^A7 |=(1/1.16)^A8 |=(1/1.16)^A9 |=(1/1.16)^A10 |=(1/1.16)^A11 |=(1/1.16)^A12 -B7*C7 -B8*C8 =B9*C9 =B10*C10 =B11 *C11 =B12 C12 =SUM(D7:D12) 7 0 8 1 9 2 10 3 11 4 12 5 Net present value (NPV) 13 n


Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in



Related Finance Q&A

Find answers to questions asked by student like you
Show more Q&A

Q: A Company project of 10 years, Paying 2,000,000 a year with a 4% growth each year, at the end of pro...

A: Preparation of table that showing formula step in excel for calculating present value of cash flow. ...


Q: Barbie is going to borrow $5,000 to help write a book.  The loan is for one year and the money can e...

A: Option 1: 1 year loan borrowed at prime rate = 11%Effective interest cost = 11%Option 2: 1 year loan...


Q: Please can you show me step by step to solve for OFC? Thank

A: OCF is Operating Cashflow which is the money a firm generates through its regular operations.


Q: If An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The fi...

A: All the financials in this solution are in $. FIgures in parenthesis mean negative values.Part (a)Th...


Q: XXX, Inc. finances tis seasonal working capital need with short-term bank loans. Management plans to...

A: Calculating the interest payment on the working capital loan. We have,Loan Amount = $ 65,000Interest...


Q: Assume​ Evco, Inc., has a current stock price of $39 and will pay a $1.80 dividend in one​ year; its...

A: Calculation of Expected Price:


Q: At the age of 33​, to save for​ retirement, you decide to deposit $80 at the end of each month in an...

A: NOTE: There is some information missing in the question. The retirement age in not mentioned in the ...


Q: d. Find the monthly payment​ (excluding escrowed taxes and​ insurance). ​(Round to the nearest dolla...

A: d.Calculation of Monthly Payment:Using Excel:


Q: You are head of the Schwartz Family Endowment for the Arts. You have decided to fund an arts school ...

A: Calculation of PV of the Gift:In order to calculate the present value of the gift, it is necessary t...