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Sorenson Stores is considering a project that has the following cash flows:

Year Cash Flow
0 CF0 = ?
1 $2,000
2 3,000
3 3,000
4 1,500

The project has a payback of 2.5 years, and the firm's cost of capital is 12%. What is the project's NPV?

a. $577.68
b. $765.91
c. $1,049.80
d. $2,761.32
e. $3,765.91

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Solution Summary

The solution explains how to calculate the project's NPV.

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NPV = PV of cash flows - initial investment
Using payback period we can calculate the initial investment
Payback ...

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