Paper 3 · June 2019 · Investment Appraisal

For Project A, the total present value of the future cash inflows discounted at Mbire Limited's 10% cost of capital is $198 418. The initial investment (an outlay of $180 000 plus an increase in working capital of $15 000) is $195 000. What is the net present value (NPV) of Project A?

Model answer

$3418

Also accepted: 3418, $3 418, 3 418

Explanation

NPV = total present value of inflows - initial investment = $198 418 - $195 000 = $3 418.

Derived from ZIMSEC Accounting Paper 3, June 2019, Q4

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