A company has a project available with the following cash flows: Year 1 2 3 4 Cash Flow -$31,430 13,140 14,740 20,990 12,140 If the required return for the project is 9.8 percent, what is the project's NPV?

A company has a project available with the following cash flows: Year 1 2 3 4 Cash Flow -$31,430 13,140 14,740 20,990 12,140 If the required return for the project is 9.8 percent, what is the project's NPV?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section10.6: Profitability Index (pi)

Problem 2ST

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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