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29 April, 02:42

Curtis is considering a project with cash inflows of $918, $867, $528, and $310 over the

next four years, respectively. The relevant discount rate is 11 percent. What

is the net present value of this project if it the start up cost is $2,100?

A) $20.98

B) $46.48

C) $52.14

D) $74.22

E) $80.81

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Answers (1)
  1. 29 April, 03:00
    0
    A) $20.98

    Explanation:

    First, find the PV of each cash inflow;

    PV (of CF1) = 918 / (1.11) = 827.0270

    PV (of CF2) = 867 / (1.11²) = 703.6766

    PV (of CF3) = 528 / (1.11³) = 386.0690

    PV (of CF4) = 310 / (1.11^4) = 204.2066

    Sum up the PVs;

    = 827.0270 + 703.6766 + 386.0690 + 204.2066

    = $2,120.9792

    NPV = - initial investment + SUM of PVs of future cash inflows

    = - 2,100 + 2,120.9792

    = $20.98
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