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Living Colour Company has a project available with the following cash flows:
Year
0
1
2
3
4
5
Cash Flow
-$ 32,190
8,510
10,290
14,820
16,330
11,420
If the required return for the project is 9.7 percent, what is the project's NPV?

To calculate the Net Present Value (NPV) of a project, we need to discount each cash flow to the present using the required rate of return (which is 9.7% in this case) and sum them all up. The NPV formula is:

\[
NPV = \sum \frac{CF_t}{(1 + r)^t}
\]

Where:
- $CF_t$ is the cash flow at time $t$,
- $r$ is the required rate of return (9.7% or 0.097),
- $t$ is the year.

We will now calculate the NPV using the following cash flows and the 9.7% discount rate:

- Year 0: $-32,190$
- Year 1: $8,510$
- Year 2: $10,290$
- Year 3: $14,820$
- Year 4: $16,330$
- Year 5: $11,420$

Let me calculate it for you.The Net Present Value (NPV) of the project is approximately **$13,808.85**.

Would you like further details or have any questions about the calculation? Here are five related questions you might find helpful:

1. How does the discount rate affect the NPV of a project?
2. What is the significance of a positive NPV for a project?
3. How would the NPV change if the discount rate were higher or lower?
4. How is NPV used in comparing different investment projects?
5. What are the limitations of using NPV for project evaluation?

**Tip:** A project with a positive NPV is generally considered a good investment since it is expected to generate more cash than its cost.

Living Colour Company has a project available with the following cash flows: Year 0: -$32,190; Year 1: $8,510; Year 2: $10,290; Year 3: $14,820; Year 4: $16,330; Year 5: $11,420. If the required return for the project is 9.7 percent, what is the project's NPV?

Learn how to calculate the Net Present Value (NPV) of a project for Living Colour Company using a 9.7% discount rate. This example includes detailed cash flows over five years and uses the NPV formula to determine the viability of the investment. Suitable for finance students or business professionals.

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