Question

# The company has a project with a 5-year life that requires an initial investment of \$210,000,...

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

= \$237,583.50

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: #### Earn Coins

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