Answered


A project produces a cash flow of $492 in year 1, $197 in year 2, and $857 in year 3. If the cost of capital is 14.5%, what is the project’s PV?



Answer :

In year 1 : 492/100×14.5=71.34; 492-71.4=420.66 ; year 2 :197/100×14.5=28.565; 197 - 28.565=128.435; Year 3 : 857/100×14.5=124.256; 857 - 124.256=732.735; Pv = 420.66 + 128.435 + 732.735 =1281.83