My Math Forum Need some help understanding.

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 November 5th, 2015, 04:44 PM #1 Newbie   Joined: Oct 2015 From: canada Posts: 9 Thanks: 0 Need some help understanding. Hey guys, currently working on a problem that is: Britney javelin company is considering two investments, both of which cost \$15000. The cash flows are as follows: year project a project b 1 \$8100 \$6750 2 5400 4050 3 4050 10800 which of the two projects should be chosen based on the net present value method? Assume a cost of capital of 7%. b. NPV for Project a Year Cash flow Present value @ 7% 1 \$8,100 \$7,570 2 5,400 4,717 3 4,050 3,306 Present value of inflows \$15,593 Initial investment 15,000 NPV (net present value) \$593 I am just confused on how on the 7570, 4717 and 3306 were found. Thanks in advance for any help! Last edited by skipjack; November 5th, 2015 at 05:15 PM.  November 5th, 2015, 05:26 PM #2 Global Moderator Joined: Dec 2006 Posts: 18,416 Thanks: 1462 \$8,100 / 1.07 = \$7,570.09 \$5,400 / 1.07² = \$4,716.57 \$4,050 / 1.07³ = \\$3,306.01 etc.

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