Question

Moates Corporation has provided the following data concerning an investment project that it is considering:

Initial investment $ 380,000
Annual cash flow $ 133,000 per year
Expected life of the project 4 years Discount rate 13 %

The net present value of the project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Answer 1

Answer:

Net present value of the project is closest to $15,542.00

Explanation:

The net present value of the project is the present value of cash inflows minus the initial investment.

The present value of the cash inflows is the yearly cash inflow of $133,000 multiplied by the annuity of 13% for 4 years i.e 2.974

Present value of inflows=2.974*$133,000=$ 395,542.00  

initial investment is $380,000

Net present value=$ 395,542.00-$380,000.00=$15,542.00