Chapter 23, Problem 6DC

Summary Introduction

Net Present Value of the project:

Net present value (NPV) can be defined as the difference between the present value of cash inflows and the present value of cash outflows. Net present value is used in the process of capital budgeting for analyzing the profitability of a projected investment or project. The formula used to calculate NPV is shown below:

Where,

• is the net cash inflow during the period
• is the initial investment cost.
• is the discount rate.
• is the total time period.

To determine:

The net present value of the project in U.S. dollars.