Net Present Value

Submitted by Rmandal on Wed, 06/05/2013 - 14:45

 Your organization considers running a project which will entail an investment of 

$1,000,000. The product from the project is forecasted to create revenues of 
$250,000 in the first year after the end of the project and of $420,000 in each of 
the two following years.
 
What is true for the net present value of the project over the three years cycle at 
a discount rate of 10%?
 
o The net present value is positive, which makes the project attractive.
o The net present value is positive, which makes the project unattractive.
o The net present value is negative, which makes the project attractive.
o The net present value is negative, which makes the project unattractive.
 
Can someone explain?
Forums: 
PMP / CAPM exam Question bank
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san

Wed, 06/05/2013 - 15:20

Please refer to http://pmzilla.com/how-calculate-npv

cnppmp's picture

cnppmp

Wed, 06/05/2013 - 15:44

The net present value is positive, which makes the project attractive


 


Regards


CN Patil

MANOJ RAMRAOJI ...

Wed, 06/05/2013 - 16:46

D

bkthakkar

Thu, 06/06/2013 - 11:47






















































  year 0 1 2 3
  Investment -1000      
      250 420 420
capital 10%        
  PV -1000 227.27 347.11 315.55
           
  NPV -110.068   negative unattractive


 


NPV is negative and hence unattractive