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The details of an investment project are as follows:
Cost of asset bought at the start of the project $80,000
Annual cash inflow $25,000
Cost of capital 5% each year
Life of the project 8 years
The present value of the cash flows that occur in the second year
of the project is:
dear sir this a question from kaplan text which was required to find the present value
but i wanted to know that if the question had stated to calculate the net present value of the question then
is this correct?
year cash in/out d/f present value
0 -80000 1 -80000
1 25000 0.952
8 25000 6.463
year 2-8 25000 5.511 137775
The cash inflows are from1 to 8 (not 2 to 8) and so the PV of the inflows would be simply 25,000 x 6.463.