Help Calculating NPV

[Stu_Souten]

Hello all

I was wondering if someone could help explain how to answer this Net Present Value Question.

Q) A piece of equipment has an initial cost of £8000 and an annual running cost of £500. Assuming a 5-year lifespan, a 3% discounting rate, and a £750 scrappage value, calculate the NPV.

I have been told that the answer is -£9609 but I am struggling to understand why?

I have made an attempt but not sure if my logic is correct.

I have calculated the loss each year and for each year i have worked out the NPV value based on the equation:-

P = S / (1 + i)^n
P = The present day value
i = interest in decimal
n = number of years.


Not factored in

Can anyone help?

 

[Harry_the_cat]

When is "present"? Is there more to the question than you are telling us? I can't see how the NPV would be negative? Or, if that is not a neg sign, then how it could be greater than 8000.