Question

Vaughn Company has the following information about a potential capital investment:

Initial investment	$	350,000
Annual cash inflow	$	84,000
Expected life		6 years
Cost of capital		10%

1. Calculate the net present value of this project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round the final answer to nearest whole dollar.)

    

Answer 1

Year	Cash Inflows	PV factor at 10%	Present value
1	$   84,000.00	0.9090909	$    76,363.64
2	$   84,000.00	0.8264463	$    69,421.49
3	$   84,000.00	0.7513148	$    63,110.44
4	$   84,000.00	0.6830135	$    57,373.13
5	$   84,000.00	0.6209213	$    52,157.39
6	$   84,000.00	0.5644739	$    47,415.81
Total			$ 365,841.90
(-) Initial Cost			$ 350,000.00
Net Present Value (NPV)			$    15,841.90

Net present value =$15,841.90 or $15,842

The final answer may vary because of decimal places in PV factor. If answer do not match please let me know in the comment section.