A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 8% to all future cash flows?

    NPV = PV of Cash Inflows – PV of Cash Outflows

    = -$250,000 + [(-$250,000 + $50,000) / 1.08] + [$50,000 / (0.08 x 1.082)]

    = -$250,000 – $185,185.19 + $535,836.76 = $100,651.58