Calculate the net present value of cash flows, Financial Management

Assume a firm has the following cash flows for the next five years: $50,000, $100,000, $150,000, $200,000, and $300,000. We start this business with an initial investment of $250,000.

a. Assuming the cost of capital is zero (free financing); what is the Net Present Value of cash flows from this project?

b. Assuming the discount rate is 3% above the rate of inflation, and the average rate of inflation is 7%, what is the Net Present Value of this project?

c. Interpret your findings in a and b.

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