1. **State the problem:** Calculate the Net Present Value (NPV) of a project with an initial outflow of 65000, cash flow in Year 1 of 22000, increasing by 5% each year for Years 2 and 3, and a discount rate of 11%. 2. **Formula for NPV:** $$\text{NPV} = -C_0 + \frac{C_1}{(1+r)^1} + \frac{C_2}{(1+r)^2} + \frac{C_3}{(1+r)^3}$$ where $C_0$ is initial investment, $C_t$ is cash flow at year $t$, and $r$ is discount rate. 3. **Calculate cash flows:** - Year 1: $C_1 = 22000$ - Year 2: $C_2 = 22000 \times 1.05 = 23100$ - Year 3: $C_3 = 23100 \times 1.05 = 24255$ 4. **Calculate present values:** - $PV_1 = \frac{22000}{(1+0.11)^1} = \frac{22000}{1.11} \approx 19819.82$ - $PV_2 = \frac{23100}{(1.11)^2} = \frac{23100}{1.2321} \approx 18743.88$ - $PV_3 = \frac{24255}{(1.11)^3} = \frac{24255}{1.3676} \approx 17733.95$ 5. **Calculate NPV:** $$\text{NPV} = -65000 + 19819.82 + 18743.88 + 17733.95 = -65000 + 56297.65 = -8702.35$$ 6. **Interpretation:** The NPV is approximately -8702.35, which means the project is expected to lose value and is not financially attractive. **Final answer:** The closest option is -8696.66.