Sandstone, Inc. is considering a fourminusyear project that has an initial afterminustax outlay or afterminustax cost of $80,000. The future cash inflows from its project are $40,000, $40,000, $30,000 and $30,000 for years 1, 2, 3 and 4, respectively. Sandstone uses the net present value method and has a discount rate of 12%. Will Sandstone accept the project?

NPV = $28020.99

so he accept the this project as NPV value is positive

Explanation:

given data

CF 0 = $80000

CF 1 = $40000

CF 2 = $40000

CF 3 = $30000

CF 4 = $30000

discount rate r = 12%

solution

we get here Net present value (NPV) of the project that is total sum of the current value of all flow that is express as

NPV =     ...........................1

put here value and we get

NPV  =  

solve it we get

NPV =  - 80000 + 35714.29 + 31887.76 + 21353.41 + 19065.54

NPV = $28020.99

so he accept the this project as NPV value is positive

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