Use the following information to answer questions 11-15: A firm evaluates a project with the following cash flows. The firm has a 2 year payback period criteria and a required return of 17 percent. Year Cash flow (OMR) |-39,000 28,000 19,000 14,000 -12,000 10,000 4 11. What is the net present value for the project?
Use the following information to answer questions 11-15: A firm evaluates a project with the following cash flows. The firm has a 2 year payback period criteria and a required return of 17 percent. Year Cash flow (OMR) |-39,000 28,000 19,000 14,000 -12,000 10,000 4 11. What is the net present value for the project?
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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Transcribed Image Text:Use the following information to answer questions 11-15:
A firm evaluates a project with the following cash flows. The firm has a 2 year payback period
criteria and a required return of 17 percent.
Year Cash flow
(OMR)
|-39,000
28,000
19,000
14,000
-12,000
10,000
4
11. What is the net present value for the project?
Expert Solution
Step 1
Net Present Value
Net present value (NPV) is the present value of cash flows. It is the difference between the value of cash inflow and cash outflow as on today. Net present value analysis is used to analyse projected profit from an investment.
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Step 2
The initial investment of the project is OMR 39,000 and the required rate is 17%.
Compute the net present value (NPV), using MS-excel as shown below:
The result of the above excel table is as follows:
Hence, the NPV is OMR 5,709.88.
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