00:01
Okay, so it says a project will produce cash inflows of $3 ,200 a year for four years, year for four years, with a financial cash flow of $5 ,700 in year five.
00:26
The project's initial cost is $9 ,500.
00:34
What is the net present value of this project if the required rate of return, so rate of return is 16 %? okay, so first we need to calculate the present value of each year's cash inflow.
00:54
The formula for the present value is present value equals cv divided by one plus r to the nth power, where pv is the present value, cf, not cv, i'm going to put cf, is cash flow.
01:17
R is the rate of return, n is the number of periods.
01:20
For the first four years, the cash flow is $3 ,200 each year, so we can calculate the present value for each of these years.
01:26
So year one, the present value is 3 ,200 divided by one plus 0 .16 to the first power, and that equals $2 ,758 .62.
01:47
Year two, we have present value equals 3 ,200 divided by one plus 0 .16, and that's raised to the first power, so again that's $2 ,758 .62...