Question
Asked Nov 7, 2019
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Judson's cost of capital is 12%, what is the project's NPV?

Year Cash Flow in $
0 ($1000)
1 400
2 400
3 600
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Expert Answer

Step 1

Net Present Value (NPV) is the sum of the present value of all the cash inflows and outflows.

Please refer to the white board for calculation and workings.

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A 8 Year Cash Flows Preset Value facor @12% Present Value of Cash Flows 0S-1,000.00 1 S 400.00 2 S 3S 1S 0.892857142857143 S 0.797193877551020 $ 0.711780247813411 $ -1,000.00 357.142857142857 10 400.00 318.877551020408 11 600.00 427.068148688047 12 $ NPV 103.088556851312 13

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Step 2

Excel Worki...

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B 8 Year Cash Flows Preset Value facor @12% Present Value of Cash Flows -B9*C9 =B10* C10 -B11*C11 =B12*C12 =SUM(D9:D12) |-1000 1/1.12 0 = 1 / 1.121 - 1 / 1.12 2 - 1 / 1.12 3 9 0 400 400 600 10 1 11 2 12 3 NPV 13

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