Final answer:
The student's question pertains to calculating the Net Present Value of an investment, incorporating the time value of money to evaluate the investment's profitability. The given data includes an initial investment, annual inflows delayed by 9 years, and a specified discount rate. The computation requires discounting future cash inflows to their present values and offsetting against the initial investment.
Step-by-step explanation:
The question is asking to calculate the Net Present Value (NPV) of an investment project, where the initial investment is $318,816, the annual cash inflows are $42,260 starting from 9 years after the investment, and the firm's cost of capital is 2.7%. To compute the NPV, one would discount each future cash inflow back to its present value using the discount rate (cost of capital) and summing these present values before subtracting the initial investment.
The formula used for calculating the present value of future cash inflows is PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the discount rate, and n is the number of periods. However, since the cash inflows start after 9 years and are presumably perpetual, you have to factor this in when computing the present value.
This would involve using annuity valuation formulas accounting for the delayed start of the inflows (perpetuity with growth), but given the information present in the question, the calculation cannot be performed without further clarification about the duration and growth rate (if any) of the cash inflows.