Question

18. Cost of project A is as 2,72,000 and offers eight annual net cash inflows of 60,000. The expected
rate of return is 14%. The NPV will be? ​

Answer 1

Answer:

6340

Explanation:

may be not sure plz check

Answer 2

Answer:

The NPV is 6,331.

Explanation:

In this question, we have to calculate the NPV of the given project. In the question, it is given that the cost of the project is 2,72,000. In the question, it is also given that the annual return of the project is 60,000 which is treated as cash inflow. Also, the expected rate of return given is 14%. Hence, from all of the information, we have to find out the NPV. The NPV means the present value of an investment from some future date. This calculates the NPV we use a formula.

The formula of NPV:

$NPV= \frac{Year 1}{(1+i)^{1} } + \frac{Year 2}{(1+i)^{2} }+ \frac{Year 3}{(1+i)^{3} }+ \frac{Year 4}{(1+i)^{4} }+ \frac{Year 5}{(1+i)^{5} }+ \frac{Year 6}{(1+i)^{6} }+ \frac{Year 7}{(1+i)^{7} }+ \frac{Year 8}{(1+i)^{8} }- Cost of project$

Now we put the values in the formula:

$NPV=\frac{60,000}{(1+0.14)^{1} } + \frac{60,000}{(1+0.14)^{2} }+ \frac{60,000}{(1+0.14)^{3} }+ \frac{60,000}{(1+0.14)^{4} }+ \frac{60,000}{(1+0.14)^{5} }+\frac{60,000}{(1+0.14)^{6} }+\frac{60,000}{(1+0.14)^{7} }+\frac{60,000}{(1+0.14)^{8}}- 2,72,000$

Now we solve this equation to calculate the value of the NPV. After solving this we get the NPV is 6,331.

Hence the NPV of project is 6,331.

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