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# What is the NPV of a project that costs \$100,000 and ...

### Resolved Question:

What is the NPV of a project that costs \$100,000 and returns \$50,000 annually for three years if the opportunity cost of capital is 14%
Submitted: 7 years ago.
Category: Finance
Expert:  Scott replied 7 years ago.
Hi there,

Now this one...

Remember that:
PV = FV/(1+r)^t

Add up the costs and the PV of the returns:

-100000 + 50000/(1+0.14)^1 + 50000/(1+0.14)^2 + 50000/(1+0.14)^3

= 16081.60

Let me know if you have any questions,
Scott
Category: Finance
Satisfied Customers: 17710
Experience: I manage my own money -- stocks, bonds, 401k, etc.
Customer: replied 7 years ago.
how do I give my quetion directly to you? I like working with you on these.
Expert:  Scott replied 7 years ago.
Hi there,

-Scott
Customer: replied 7 years ago.
What would you estimate to be the required rate of return for equity investors if a stock sells for \$40 and will pay a \$4.40 dividend that is expected to grow at a constant rate of 5%?
Expert:  Scott replied 7 years ago.
Hi there,

I'm assuming that the 4.40 is the next dividend.

The formula for this is:
Value = Next Dividend / (Required Return - Dividend Growth)

Plug in what we know:
40 = 4.4 / (r - 0.05)

Multiply:
40(r-0.05) = 4.4

Divide by 40:

r-0.05 = 0.11

r = 0.16
r = 16%

Let me know if you have any questions,
Scott
Category: Finance
Satisfied Customers: 17710
Experience: I manage my own money -- stocks, bonds, 401k, etc.

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