Evaluating Project NPV

Easy Capital Budgeting Project Analysis

Sarah is evaluating a potential investment project for her company. The project requires an initial investment of $100,000 and is expected to generate annual cash flows of $30,000 for five years. After five years, the company plans to salvage the project for an estimated value of $20,000. Sarah wants to calculate the Net Present Value (NPV) of the project using a discount rate of 10%.

Which of the following statements accurately represents the NPV of the project?

The NPV of the project is positive, indicating it is a worthwhile investment.

The NPV of the project is zero, indicating it should neither be accepted nor rejected.

The NPV of the project is negative, indicating that it should be rejected.

Hint

Submitted2.8K

Correct2.4K

% Correct85%