XYZ Corporation has provided the following data concerning an investment project that it is considering: Initial investment $410,000
Annual cash flow $117,000 per year
Expected life of the project 4 years
Discount rate 9%

The net present value of the project is closest to:

NPV= -$30,952.77

Explanation:

Giving the following information:

Initial investment $410,000

Annual cash flow $117,000 per year

Expected life of the project 4 years

Discount rate 9%

To calculate the NPV, we need to use the following formula:

NPV= -Io + ∑[Cf/(1+i)^n]

∑[Cf/(1+i)^n]:

Cf1= 117,000/1.09= 107,339.45

Cf2= 117,000/1.09^2= 98,476.56

Cf3= 117,000/1.09^3= 90,345.47

Cf4= 117,000/1.09^4= 82,885.75

∑[Cf/(1+i)^n]= $376,047.23

Now, the NPV:

NPV= -410,000 + 376,047.23

NPV= -$30,952.77

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