The following net cash flows relate to Lockhart Limited in connection with a certain project that has an initial cost of £2,500,000: Year Net cash flow £ 1 800 (excluding the initial cost) 2 850 3 830 4 1200 5 700 The company’s required rate of return is 15 per cent. Required: Calculate the net present value of the project.

Net present value for a Lockhart project: Year Net cash flow £000 Discount factor @15% Present value £000 1 800 0.8696 696 2 850 0.7561 643 3 830 0.6575 546 4 1200 0.5718 686 5 700 0.4972 348 Total present value 2919 Initial cost 2500 Net present value 419

Question 19.TQ.7: The following net cash flows relate to Lockhart Limited in c...

Accounting for Non-Accounting Students

The following net cash flows relate to Lockhart Limited in connection with a certain project that has an initial cost of £2,500,000:

Year	Net cash flow
	£
1	800	(excluding the initial cost)
2	850
3	830
4	1200
5	700

The company’s required rate of return is 15 per cent.

Required:
Calculate the net present value of the project.

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