To calculate the Net Present Value (NPV) of the project, we use the formula:

$NPV = C_0 + \frac{C_1}{(1 + r)^1} + \frac{C_2}{(1 + r)^2}$

Where:

• $C_0, C_1, C_2$ are the cash flows,
• $r$ is the opportunity cost of capital (in decimal form),
• $t$ is the time period.

Given:

• $C_0 = 3,800$
• $C_1 = 5,200$
• $C_2 = -11,000$
• $r = 0.14$ (14%)

Step 1: Substitute values into the NPV formula

$NPV = 3800 + \frac{5200}{(1 + 0.14)^1} + \frac{-11000}{(1 + 0.14)^2}$

Step 2: Calculate each term

1. Present value of $C_1$: $\frac{5200}{(1 + 0.14)^1} = \frac{5200}{1.14} \approx 4561.40$

2. Present value of $C_2$: $\frac{-11000}{(1 + 0.14)^2} = \frac{-11000}{1.14^2} = \frac{-11000}{1.2996} \approx -8462.95$

3. Combine the terms: $NPV = 3800 + 4561.40 - 8462.95$

   $NPV \approx -101.55$

Final Answer:

The NPV of the project is approximately $-101.55.

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Would you like a further breakdown of the calculation, or clarification of any concepts?

Related Questions:

1. What does a negative NPV indicate about a project?
2. How does the internal rate of return (IRR) compare to the cost of capital?
3. What is the relationship between NPV and the opportunity cost of capital?
4. How can changes in cash flow timing affect the NPV?
5. Can a project with a positive IRR still have a negative NPV?

Tip:

Always compare the IRR with the opportunity cost of capital to determine if the project creates value. If IRR exceeds the cost of capital, the project is typically worth pursuing.