A project has an initial cost of $400,000 and is estimated to produce cash flows of $X at the end of each year for 8 years. If the internal rate of return for the project is 15.7% p.a. effective, calculate X (to the nearest dollar). Select one: a. $91201 b. $1754368 c. $98171 d. $85928
Annuity payment= | P/ [ [1- (1+r)-n ]/r ] | |||
P= | Present value | 400,000.00 | ||
r= | Rate of interest per period | |||
Rate of interest per annum | 15.7% | |||
Payments per year | 1.00 | |||
Rate of interest per period | 15.700% | |||
n= | number of payments: | |||
Number of years | 8 | |||
Payments per year | 1.00 | |||
number of payments | 8 | |||
Annuity payment= | 400000/ [ (1- (1+0.157)^-8)/0.157 ] | |||
Annuity payment= | 91,200.91 |
Answer is 91,201
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