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A-11 Present Value of Cash Flows
Star City is considering an investment in the community center that is expected to return the
following cash flows:
This schedule includes all cash inflows from the project, which will also require an immediate
$212,000 cash outlay. The city is tax-exempt; therefore, taxes need not be considered.
What is the net present value of the project if the appropriate discount rate is 24 percent?
Star City is considering an investment in the community center that is expected to return the
following cash flows:
Solution
NPV = $-20500.50
year cash flow discount rate present value of cash flow
0 -212000 1 -212000
1 32,000 0.806 25806.45
2 62,000 0.650 40322.58
3 92,000 0.524 48252.83
4 92,000 0.423 38913.57
5 112,000 0.341 38204.07
total -20500.50
A-11 Present Value of Cash Flows Star City is considering an investmen.docx

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  • 1. A-11 Present Value of Cash Flows Star City is considering an investment in the community center that is expected to return the following cash flows: This schedule includes all cash inflows from the project, which will also require an immediate $212,000 cash outlay. The city is tax-exempt; therefore, taxes need not be considered. What is the net present value of the project if the appropriate discount rate is 24 percent? Star City is considering an investment in the community center that is expected to return the following cash flows: Solution NPV = $-20500.50 year cash flow discount rate present value of cash flow 0 -212000 1 -212000 1 32,000 0.806 25806.45 2 62,000 0.650 40322.58 3 92,000 0.524 48252.83 4 92,000 0.423 38913.57 5 112,000 0.341 38204.07 total -20500.50