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Stone Inc. is evaluating a project with an initial cost of $9,500. Cash inflows are expected to be $1,500, $1,500, and $10,000 in the three years over which the project will produce cash flows. If the discount rate is 6%, what is the net present value of the project?

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Answer:

Net present value is 1646

Explanation:

See document attached.  To get the net present value,  we make a cash flow in excel.  

At moment 0 we have the investment cost , in this case $9,500. From period 1 to period 3, we have incomes o benefits of $1,500, $1,500, and $10,000 from moment 1 to 3.

Then, we calculate the Net cash flow that is the difference between benefits and cost.

To get  net present value,  we use VNA formula.  

=VNA(discount rate; Net cash flow from moment 0 to moment 3 )+Net cash flow at moment 0

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