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To calculate the net present value, convert all future and repeated cash flows into present value. Given the following cash flows and an interest rate of 2%, calculate the net present value of the alternative. Round your answer to the nearest dollar.

To calculate the net present value, convert all future and repeated cash flows into present value. Given the following cash flows and an interest rate of 2%, calculate the net present value of the alternative. Round your answer to the nearest dollar.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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To calculate the net present value, convert all future and repeated cash flows into present value. Given the following cash flows and an interest rate of 2%, calculate the net present value of the alternative. Round your answer to the nearest dollar. Initial Cost: $627 Annual Benefit: $78 for 12 years Salvage Value: $202 at end of year 12
Transcribed Image Text:To calculate the net present value, convert all future and repeated cash flows into present value. Given the following cash flows and an interest rate of 2%, calculate the net present value of the alternative. Round your answer to the nearest dollar. Initial Cost: $627 Annual Benefit: $78 for 12 years Salvage Value: $202 at end of year 12
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In economics, present value refers to the current value of a future stream of cash flows. The net present value is the difference between the present value of cash inflows and the present value of cash outflows.

The net present value analysis is used to check the profitability of investments. The investments that result in a positive net present value are considered profitable.

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