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Net Value

A project has an upfront cost of $21,300,000. It's estimated that the project will produce the following net cash flows:

Year Project Net Cash Flows
1 $13,000,000
2 $3,000,000
3 $7,200,000

a) What's the project's net present value when the cost of capital is 4%?
b) What's the project's net present value when the cost of capital is 11%?

Solution Preview

($21,300,000) $13,000,000 $3,000,000 $7,200,000
4%
NPV = $374,442
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T=0 -$21,300,000 / 1.04^0 = -$21,300,000 PV.
T=1 $13,000,000 / 1.04^1 = ...

Solution Summary

A project's net present values are calculated when the cost of capital is 4% and 11%.

$2.19