The company has a project with a 5-year life that requires an initial investment of $210,000, and is expected to yield annual cash flows of $59,500. What is the net present value of the project if the required rate of return is set at 8%?
Net Present Value= ($59,500*???)-210,000
What NPV does the previous calculation yield? $Note: Round your answer to the nearest whole dollar.
The problem is related to the calculation of Net Present Value of a project.
Present Value of Annual Cash Flows for 5 years = Annual Cash Flow $59,500 * Present Value annuity factory at 8% for 5 years
= $59,500 * 3.993
Initial Investment i.e. Cash Outflow = $210,000
Net Present Value = $237,583.50 - $210,000
= $27,583.50 or $27,584
What NPV does the previous calculation Yield = $27,584
Present Value of an annuity table is used for above calculation:
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