Jones Corp is evaluating a project that has the following annual free cash flows:

Period 00 11 22

The full question is found below:

Jones Corp is evaluating a project that has the following annual free cash flows:

Period : Free cash flow

0 : - 150

1 : 100

2 : 150

If the project's discount rate is 12%, then what is the NPV of the project?

NPV is $58.86

Explanation:

The Net Present Value of the project's free cash flows is the present worth of the cash inflows minus the initial investment.

The present worth is also known as present value which is a reflection of today's equivalent amount of a cash flow receivable in future.

NPV=-$150+$100 / (1+12%) ^1+$150 / (1+12%) ^2 = $58.86

The cash inflows are divided by the discount factor, whose formula is (1+r) ^n

where r is the project discount rate of 12% and n is the year of cash flow