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A project with an initial cost of $50,000 (Year 0) with a life of 5 years is under consideration. The annual benefits and costs
A project with an initial cost of $50,000 (Year 0) with a life of 5 years is under consideration. The annual benefits and costs at end of Year 1 to end Year 5 are expected at $40,000 and $15,000 respectively. The discount rates at 3% for end of year 1 to year 5 are .978, .943, .915, .888, and .863. 1.What is the PV of the cost for each year? (YO, Y1, Y2, Y3, Y4, and Y5). What is the total PV costs? 2.What is the PV of the benefits of Y1, Y2, Y3, Y4, and Y5? What is the total? 3.What is the NPV for this project? (Hint: subtract the total PV costs from the total PV of benefits?
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