Find the NPV and PI of a project that costs $1,500 and returns $800 in year 1 and $850 in year 2. Assume the project's cost of capital is 8 percent.
Find the IRR of a project that returns $17,000 three years from now if it costs $ 12,000
The first step in calculating the NPV is knowing the formula.
NPV = sum of the present value of future cash flows minus the initial investment
To calculate the present value of future cash flows, we need a present value table. Since the amounts differ in year 1 and year 2, we must use the present value of $1 table and NOT the present value of an annuity table.
The present value factor for 8% ...