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John Moffat.
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reem1589
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Could you please explain how to do this question. the answer is C.
The following information relates to a two-year project.
Initial investment $1 million
Cash inflow Year 1 $750,000
Cash inflow Year 2 $500,000
Cost of capital Year 1 10%
Cost of capital Year 2 15%
What is the net present value of the project (to the nearest $500)?
A ($12,000)
B ($55,000)
C $77,000
D $116,500
John Moffat
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To get the PV of the year 1 inflow, you multiply by the 1 year discount factor at 10%.
To get the PV of the year 2 inflow, you multiply by the 1 year discount factor at 15% and then by the 1 year discount factor at 10%.
reem1589
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