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Using the method of your choice, calculate the Net Present Value of the following cash flows. Assume that the required return on this project is 15%
Project A
Initial Cost -$150
Year 1 $175
Year 2 $100
A. $15
B. $35
C. $55
D. $70
E. $78

Respuesta :

Answer:

E. $78

Explanation:

The computation of the net present value is shown below:

Net present value is

= Initial investment + year cash inflows ÷  (1 + discount rate)^number of years + year cash inflows ÷  (1 + discount rate)^number of years

= -$150 + $175 ÷ 1.15 + $100 ÷ 1.15^2

= $77.78

= $78

Hence, the correct option is E. $78

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