"Consider the cash flow for an investment project with MARR =
12.4%. Determine the annual equivalent worth for the project. The
answer could be negative.
The cash flow for years 0 through 4 in dollars is as follows:
3,900
1,800
1,600
1,500
440"
Annual Equivalent Worth
Year 
Annual Cash Inflow ($) 
Present Value Factor at 12.40% 
Present Value of Annual Cash Inflow ($) 
1 
1800 
0.88968 
1,601.42 
2 
1600 
0.79153 
1,266.45 
3 
1500 
0.70421 
1,056.31 
4 
440 
0.62652 
275.67 
TOTAL 
3.01194 
4,199.85 

Net Present Value (NPV) = Present Value of annual cash inflows – Initial Investment
= $4,199.85  $3,900
= $299.85
Annual Equivalent Worth = Net Present Value / (PVIFA 12.40%, 4 Years)
= $299.85 / 3.01194
= $99.55
“Thus, the Annual Equivalent Worth would be $99.55”
NOTE
The Formula for calculating the Present Value Factor is [1/(1 + r)^{n}], Where “r” is the Discount/Interest Rate and “n” is the number of years.
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