contestada

The Spoon Restaurant is considering a project with an initial cost of $525,000. The project will not produce any cash flows for the first three years. Starting in year four, the project will produce cash inflows of $721,000 a year for three years. This project is risky, so the firm has assigned it a discount rate of 17 percent. What is the project's net present value?

Respuesta :

beritop1089

Answer:

$469,691.45

Explanation:

To solve this using a financial calculator, input the following;

Initial investment; CF0 = -525,000

Yr1 to Yr3 cashflows ; C01 to C03 = 0

Yr4 cashflow; C04 = 721,000

Yr5 cashflow; C05 = 721,000

Yr6 cashflow; C06 = 721,000

Interest rate ; I/Y = 17%

then compute Net present value; CPT NPV = 469,691.45

Therefore, this project's NPV = $469,691.45