A project offers the following incremental after-tax cash flows:
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flow(€） | -12,500 | 2,000 | 4,000 | 5,000 | 2,0 |
The appropriate discount rate to use in evaluating the project is 8%. The NPV (in €) of the project is closest to:
A is correct. Enter the given cash flows and the given discount rate into a financial calculator and solve for NPV. CF0 = -12,500, CF1 = 2,000, CF2 = 4,000, CF3 = 5,000, CF4 = 2,000, i = 8%. Compute PV. The NPV is -1,780.
Alternatively, solve the following: -12,500 + (2,000 + 1.08) + (4,000 + 1.082 ) + (5,000 + 1.083 ) + (2,000 +1.084 ) = -1779.57.