Help! Finding Npv

[David1717]

The interest rate is 8%.
Investment project requires an up-front payment of $100 and creates returns of 40, 30 and 48$ in 3 years of its duration. Is the project worthwhile?
find NPV

[factor-fiction]

It depends on the timings of the returns. Assuming it's the end of year 1,2 and 3:

In present day values the $40 is worth 40÷ 1.08, the $30 is worth $30 ÷ (1.08)² and the $48 is worth $48 ÷ (1.08)³

[factor-fiction]

Better still, read this and try to understand what needs to be done
http://en.wikipedia.org/wiki/Net_present_value

[David1717]

Thanks a lot! Now I understand!
The answer is 100.86 and NPV=100.86-100= $0.86 (as it is positive, the project is wothwhile). Thanks!

[factor-fiction]

I agree with your figure of £0.86 for the NPV.
In practice though that's a negligible benefit so I doubt as business proposition it might be rejected if there are any risks or better options exist

[factor-fiction]

Sorry, several words seem to be missing from my post, but I hope you can make sense of it