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Answer :
The project's NPV is $3,962.11.
To calculate the project's NPV, we need to discount each cash flow to present value and then sum them up. The formula for calculating NPV is:
NPV = CF0 + CF1 / (1+r) + CF2 / (1+r)^2 + CF3 / (1+r)^3 + CF4 / (1+r)^4
where CF0 is the initial cash flow, CF1 to CF4 are the cash flows in years 1 to 4, and r is the required return.
In this case, CF0 is -$36,230, CF1 is $12,540, CF2 is $14,740, CF3 is $19,590, CF4 is $10,940, and r is 7.8%.
Using the formula, we can calculate the present value of each cash flow:
PV0 = -$36,230
PV1 = $12,540 / (1+0.078) = $11,594.21
PV2 = $14,740 / (1+0.078)^2 = $12,821.51
PV3 = $19,590 / (1+0.078)^3 = $16,939.83
PV4 = $10,940 / (1+0.078)^4 = $8,006.85
Finally, we sum up the present values to find the NPV:
NPV = PV0 + PV1 + PV2 + PV3 + PV4 = -$36,230 + $11,594.21 + $12,821.51 + $16,939.83 + $8,006.85 = $3,962.11.
Therefore, the project's NPV is $3,962.11.
Net present worth (NPV) is the contrast between the current worth of money inflows and the current worth of money surges throughout some undefined time frame. NPV is utilized in capital planning and venture wanting to break down the productivity of a projected speculation or task.
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