A company is expected to generate the following cash flows over the next 4 years:

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-A company is expected to generate the following cash flows over the next 4 years:

    • Year 1: $50,000
    • Year 2: $60,000
    • Year 3: $70,000
    • Year 4: $80,000

The required rate of return (discount rate) is 10%.

Questions:

  1. Calculate the value of these future cash flows at year 5

 

 

 

-A project requires an initial investment of $200,000 and will generate the following cash flows over the next 5 years:

    • Year 1: $60,000
    • Year 2: $70,000
    • Year 3: $80,000
    • Year 4: $90,000
    • Year 5: $100,000
    • The company has a required rate of return of 12%.

Questions:

  1. Calculate the NPV of the project.