A project will not produce any cash flows for two years. Starting in the third year, it will produce annual cash flows of $11,900 a year for two years. The project initially costs $43,600. In Year 6, the project will be closed and as a result should produce a final cash inflow of $50,500. What is the net present value of this project if the required rate of return is 8.7 percent?


Answer 1


The NPV of the project at 8.7 percent will be  4,802.58‬


We will calcualte the present value of the cash inflow:

(Inflow)/((1 + rate)^(time) ) = PV  

year 3:

Inflow     11,900.00

time          3.00

rate          0.087

(11900)/((1 + 0.087)^(3) ) = PV

PV    9,265.28

Year 4:

Inflow      11,900.00

time           4.00

rate           0.087

(11900)/((1 + 0.087)^(4) ) = PV  

PV   8,523.71

Year 6:

Inflow      50,500.00

time   6.00

rate  0.087

(50500)/((1 + 0.087)^(6) ) = PV  

PV   30,613.58

Then, we will add them together and subtract the investment amount

NPV: 30,613.59 + 8,523.71 + 9,265.28 - 43,600 = 4,802.58‬

Related Questions

The bottom-up approach for estimating times and costs that uses costs from past projects that were similar to the current project is known as
Writing a check on an account with insufficient funds is allowed under certain conditions.
What is the​ government's policy on collusion in the United​ States? Explain the rationale for this policy. In the United States A. the government makes collusion legal with antitrust laws because monopolies create no deadweight loss. B. the government makes collusion unnecessary with​ government-imposed barriers to entry because monopolies enhance economic efficiency. C. the government encourages collusion with subsidies because resulting profits can be used to develop new products. D. the government promotes collusion with the Federal Trade Commission because perfectly competitive markets enhance economic efficiency. E. the government makes collusion illegal with antitrust laws because monopolies reduce economic efficiency.
onsider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $80,000 or $220,000 with equal probabilities of .5. The alternative risk-free investment in T-bills pays 5% per year. a. If you require a risk premium of 5%, how much will you be willing to pay for the portfolio
The following information pertains to Guillotine Corporation: Beginning inventory 1,000 units Ending inventory 6,000 units Direct labor per unit $40 Direct materials per unit $20 Variable overhead per unit $10 Fixed overhead per unit $30 Variable selling and admin. costs per unit $6 Fixed selling and admin. costs per unit $14A) What is the value of the ending inventory using the absorption costing method?a) $600,000b) $100,000c) $120,000d) $70,000

The Sourdough Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labor-hours. Following is some budget data for the Sourdough Bread Company:Direct manufacturing labor use 0.02 hours per baguetteVariable manufacturing overhead $10.00 per direct manufacturing labor-hourThe Sourdough Bread Company provides the following additional data for the year ended December 31, 2017:Planned (budgeted) output 3,100,000 baguettesActual production 2,600,000 baguettesDirect manufacturing labor 46,800 hoursActual variable manufacturing overhead $617,760What is the denominator level used for allocating variable manufacturing` overhead? (That is, for how many direct manufacturing labor-hours is Sourdough Bread budgeting?)


When management policy is to write off completely the production volume variance to cost of goods sold and the organization is experiencing increasing inventory.

What are the allocating variable manufacturing overhead?

The impacts of various denominator levels under absorption, costingincome in fixed overhead allocation rates.

We provide a pedagogical method for teaching students how "denominator level choice" affects absorption costing income in a typical costing system with predefined overhead application rates.

Alternately, using larger denominator levels while inventory is falling mitigates the decline in absorption costing income since fixed overhead is released into cost of goods sold.

Therefore, We also prove mathematically that the denominator level choice has no impact on absorption costing income if the production volume variance is prorated based on the units causing the variance.

Learn more about allocating variable here:



why can’t i c o o l ww man

1. Understanding opportunity costYou work as an assistant coach on the university swim team and earn $15 per hour. One day, you decide to skip the hour-long practice and go to the county fair instead, which has an admission fee of $9.The total cost (valued in dollars) of skipping practice and going to the fair (including the opportunity cost of time) is .(A) $6
(B) $9
(C) $15
(D) $24



Option (D) is correct.


Given that,

Money income earned as a swimming assistant coach at university = $15 per hour

Admission fee for the county fair = $9

Here, the opportunity cost of skipping the practice is the loss of money income from the coaching.


Total cost of skipping practice:

= Money income lost for one hour + Admission fee for the county fair

= $15 + $9

= $24

Pink Polka Fashion Inc., a multinational clothing brand, has plans to expand in the European Union (EU) marketplace. In order to be able to do so, the EU requires that the:a) firm adopt techniques of total quality managementb) firm achieve six sigmac) firm uses just-in-time inventory systemd) firm patents its designs and technologye) firm's products be certified under ISO 9000



what is the question being asked here?

John's lifelong dream is to own his own fishing boat to use in his retirement. John has recently come into an inheritance of $500,000. He estimates that the boat he wants will cost $400,000 when he retires in 5 years. How much of his inheritance must he invest at an annual rate of 10% (compounded annually) to buy the boat at retirement?



PV= $248,368.53


Giving the following information:

Future Value (FV)= $400,000

Number of periods (n)= 5

Interest rate (i)= 10% = 0.1

To calculate the present value (PV), we need to use the following formula:

FV= PV*(1í)^n

Isolating PV:

PV= FV/(1+i)^n

PV= 400,000 / (1.1^5)

PV= $248,368.53

Completed Per Day Flower Beds Weeded

Bags of Leaves Raked







Samantha and Adam own a gardening business together. They each pull weeds from flower beds and rake up leaves for their neighbors. If each decides to specialize in what they are best at, Samantha will

a.weed and Adam will rake because these are the goods each has a comparative advantage in.

b.rake and Adam will weed because these are the goods each has a comparative advantage in.

c.weed and Adam will rake because these are the goods each has an absolute advantage in.

d.rake and Adam will weed because these are the goods each has an absolute advantage in.



The correct option is A, Samantha weed and Adam will rake because these are the goods each has a comparative advantage in.


The opportunity formula comes handy in this case, which is given below:

opportunity cost formula=what one sacrifices/what one gains

If Samantha were to weed flower beds, opportunity cost is computed thus:

Opportunity cost of Samantha weeding flower beds=8/4= 2 bags of leaves raked

The opportunity of Adam weeding flower beds=25/5 =5 bags of leaves raked.

In a nutshell ,if Samantha weeds flowers they would lose 2 bags of leaves raked while if Adam were to do so same, they would lose 5 bags of leaves raked, conclusively Samantha should weed flower beds since she has lower opportunity, higher comparative advantage

Enterprise zones are: A. government-owned properties that are available for entrepreneurial ventures at a reduced cost.B. similar to incubator facilities but strictly run by city and state governments.C. blighted areas that contain toxic materials making them unsuitable for business operations.D. specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks for operating in these areas.


Answer: Option D

Explanation: Enterprise zones are established by the government with the objective of development and economic growth in the local neighborhood.

The investors are attracted to make their business centers or production units in such areas by giving them incentives such as tax exemptions or other such benefits.

These are made usually in under developed areas. In countries like China and India, these areas are called special economic zones.

Other Questions