A project has estimated annual net cash flows of $6,250 for two years and is estimated to cost $30,000. Assume a minimum acceptable rate of return of 12%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.833 0.909 0.893 0.870 1.626 2 1.833 1.736 1.690 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 3.837 9 6.210 6.802 7.360 5.335 4.968 4.487 4.772 5.019 5.759 6.145 4.031 5.328 5.650 10 4.192 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places)
A project has estimated annual net cash flows of $6,250 for two years and is estimated to cost $30,000. Assume a minimum acceptable rate of return of 12%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.833 0.909 0.893 0.870 1.626 2 1.833 1.736 1.690 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 3.837 9 6.210 6.802 7.360 5.335 4.968 4.487 4.772 5.019 5.759 6.145 4.031 5.328 5.650 10 4.192 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Net Present Value
A project has estimated annual net cash flows of $6,250 for two years and is estimated to cost $30,000. Assume a minimum acceptable rate of return of 12%. Use the Present Value of an Annuity of $1 at Compound Interest table
below.
Present Value of an Annuity of $1 at Compound Interest
Year
6%
12%
15%
20%
1
0.943
2
3
4
5
6
7
8
9
1.833
2.673
3.465
4.212
4.917
5.582
6.210
6.802
10
10%
7.360
0.909
1.736
2.487
3.170
3.791
4.355
4.868
5.335
5.759
6.145
0.893
1.690
2.402
3.037
3.605
4.111
0.870
1.626
2.283
2.855
3.353
3.785
4.160
4.487
4.772
0.833
5.019
1.528
2.106
2.589
4.564
4.968
5.328
5.650
Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value.
Net present value of the project (round to the nearest dollar)
Present value index (rounded to two decimal places)
2.991
3.326
3.605
3.837
4.031
4.192
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