Question

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 thinet present value of this project if the required rate of return is o a. $2,602.24 o b. $2.168.02 o c.-$311.02 o d. $21,168.02

Answer 1

The net present value is $2168.02, on the given cash inflows of the project. Hence the answer is option (d)

What are the inflows of cash?

Cash inflow is the term used to describe the money that enters a firm. It might originate from sales, investments, or financing. A cash inflow is the opposite of a cash outflow since it involves money coming into a business.

Purchasing securities to be retained as investments, such as stocks or bonds in other companies or in Treasury securities, is included in cash flows from investments. The capacity of a corporation to produce positive cash flows determines its potential to create value for shareholders. Operating cash flows, cash flows from investments, and cash flows from financing are the three different types of cash flows.

Given:

Net Present Value = Present Value of Cash - Present Value of Outflows

= [3200×1/(1.16)^1+3200 × 1/(1.16)^2+3200 × 1/(1.16)^3+3200 × 1/(1.16)^4+57

= $2168.02

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