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Finding NPV of the given proposal

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A machine has a cost of $5,375,000. It will produce cash inflows of $1,825,000 (Year 1); $1,775,000 (Year 2); $1,630,000 (Year 3); $1,585,000 (Year 4); and $1,650,000 (Year 5). At a discount rate of 16.25%, what is the NPV?

a. $81,724
b. $257,106
c. $416,912
d. $190,939

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Solution Summary

The solution describes the steps to find out the NPV of the given investment proposal.

Solution Preview

Assume all cash flows are at the end of periods.

Current Cash flow=Machine Cost=C0=-$5,375,000 (Negative sign indicates cash outflow)
Cash flow at the end of Year1=C1=$1,825,000
Cash ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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