Question

The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $450,000. The Sisyphean Company expects cash inflows from this project as detailed below:

Year One $200,000
Year Two $225,000
Year Three $275,000
Year Four $200,000

The appropriate discount rate for this project is 16%. The NPV for this project is closest to:_________

a. $179,590
b. $450,000
c. $176,720
d. $123,420

Answer 1

Answer:

c.$176,720

Explanation:

Calculation for The NPV for this project

NPV=-450,000+200,000 / (1.16)^1+225,000 / (1.16)^2+275,000 / (1.16)^3+200,000 / (1.16)^4

NPV=-450,000+172,414+167,212+176,181+110,458

NPV=176,720

Therefore The NPV for this project is closest to :176,720