What is the NPV of a project that costs $100,000 and returns $50,000 annually for 3 years if the opportunity cost of capital is 14%?

Sure, here's how you can calculate the Net Present Value (NPV) of the project:

1. Identify the cash flows: The initial cost of the project is $100,000 (this is an outflow so it will be negative). The project then returns$50,000 annually for 3 years (these are inflows so they will be positive).

2. Identify the discount rate: The opportunity cost of capital is 14%.

3. Calculate the present value of each cash flow: The formula for present value is PV = CF / (1 + r)^n, where CF is the cash flow, r is the discount rate, and n is the year.

   • For the initial cost, n = 0 (as it is at the start of the project), so the present value is -$100,000 / (1 + 0.14)^0 = -$100,000.

   • For the first return, n = 1, so the present value is $50,000 / (1 + 0.14)^1 =$43,859.65.

   • For the second return, n = 2, so the present value is $50,000 / (1 + 0.14)^2 =$38,454.09.

   • For the third return, n = 3, so the present value is $50,000 / (1 + 0.14)^3 =$33,732.89.

4. Sum up all the present values: The NPV is the sum of all these present values, which is -$100,000 +$43,859.65 + $38,454.09 +$33,732.89 = $16,046.63.

So, the NPV of the project is $16,046.63. Since the NPV is positive, the project is expected to add value and therefore could be considered a good investment.