NPV??? Calculate the net present value (NPV?) for a 15-year project with an init

Question

NPV???

Calculate the net present value (NPV?) for a 15-year project with an initial investment of $15,000 and a cash inflow of $4,000 per year. Assume that the firm has an opportunity cost of 13%.

Comment on the acceptability of the project.

The? project's net present value is:

Round to the nearest cent

Is the project acceptable?

When NPV is used to make? accept-reject decisions, the decision criteria are as? follows: If the NPV is greater than? $0, accept the project. If the NPV is less than ?$0, reject the project.

Explanation / Answer

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$4000[1-(1.13)^-15]/0.13

=$4000*6.462378823

=$25849.52

NPV=Present value of inflows-Present value of outflows

=$25849.52-$15000

=$10849.52(Approx).

Hence since NPV is positive;project must be accepted.

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