A project has an initial outlay of $3,373. It has a single payoff at the end of year 10 of $6,561. What is the net present value (NPV) of the project if the company's cost of capital is 13.42 percent?

Round the answer to two decimal places.

Answer:

 

NPV=ΣC_t /(1+r)^t - Initial outlay

where,

C_t=$6,561

r=13.42%

t=10

In this case there is single payoff at the 10th year so we have to calculate NPV according to that

For one to nine year there is zero payoff so value is zero for that

NPV=$,6,561 / (1+13.42%)¹⁰ -$3,373

=$,6,561 / (1+0.1342)¹⁰ -$3,373

=$,6,561 / (1.1342)¹⁰ -$3,373

=$,6,561 /3.52287 -$3,373

=$1,862.40 - $3,373

=-$1,510.60