Answer:
$52,521
Explanation:
As per Given Data
Project Y
Costs $120,000
Cash Inflows
Year 1 $64,000
Year 2 $67,000
Year 3 $56,000
Year 4 $45,000
Required rate of return = 16%
Weighted Average cost of Capital = 13%
Net Present Value
As we know Net Present value is calculated by discounting each years cash flows using using the Weighted Average cost of Capital.
Costs $120,000
Year Cash Inflows Discount factor 13% Present values
Year 0 $(120,000) (1+13%)^-0 $(120,000)
Year 1 $64,000 (1+13%)^-1 $56,640
Year 2 $67,000 (1+13%)^-2 $52,471
Year 3 $56,000 (1+13%)^-3 $38,811
Year 4 $45,000 (1+13%)^-4 $27,599
Net present value $52,521
