Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is Project Y Time 2 3 5 Cash Flow 50,000 $7,e00 $20,000 $20,000 $20,000 $10,ee0
Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is Project Y Time 2 3 5 Cash Flow 50,000 $7,e00 $20,000 $20,000 $20,000 $10,ee0
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![**Project Y: Net Present Value Calculation**
Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent.
**Cash Flows:**
- **Time 0:** -$50,000
- **Time 1:** $7,000
- **Time 2:** $20,000
- **Time 3:** $20,000
- **Time 4:** $20,000
- **Time 5:** $10,000
**Multiple Choice Options:**
1. $107,788.34
2. $9,367.11
3. $7,788.34
4. -$19,594.29
To calculate the NPV, discount each cash flow back to its present value using the formula:
\[ \text{NPV} = \sum \left( \frac{C_t}{(1 + r)^t} \right) \]
Where \( C_t \) is the cash flow at time \( t \) and \( r \) is the discount rate (10% here). Compare the calculated NPV with the multiple-choice options to select the correct answer.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F302e2d83-124e-4749-a014-0416d12786b1%2F9a35ab17-38a2-4052-b9cc-8cbfcc8557d6%2F4xt4qj_processed.png&w=3840&q=75)
Transcribed Image Text:**Project Y: Net Present Value Calculation**
Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent.
**Cash Flows:**
- **Time 0:** -$50,000
- **Time 1:** $7,000
- **Time 2:** $20,000
- **Time 3:** $20,000
- **Time 4:** $20,000
- **Time 5:** $10,000
**Multiple Choice Options:**
1. $107,788.34
2. $9,367.11
3. $7,788.34
4. -$19,594.29
To calculate the NPV, discount each cash flow back to its present value using the formula:
\[ \text{NPV} = \sum \left( \frac{C_t}{(1 + r)^t} \right) \]
Where \( C_t \) is the cash flow at time \( t \) and \( r \) is the discount rate (10% here). Compare the calculated NPV with the multiple-choice options to select the correct answer.
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