$540.79 is the NPV of a project expected to generate $1,000 a year for 5 years assuming a discount rate of 10% and an initial outlay of $3,250.
The difference between the present value of cash inflows and outflows over time is known as net present value (NPV). The profitability of a proposed investment or project is examined using NPV in capital budgeting and investment planning.
NPV is the outcome of computations that determine the current value of a future stream of payments using the appropriate discount rate. Projects that have a positive NPV are often worthwhile pursuing, but those that have a negative NPV are not.
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