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Sorenson Stores' project NPV

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

Year Cash Flows (end of period)
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

Calculates NPV of a project.

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The answer is in the attached file.

Answer:         b. $765.91

First, the initial investment has to be calculated
Since Payback period is 2.5 years, initial ...

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