Question

A project requires an initial investment of 12,000 dollars. The lifetime of the project will be 14 years with a cashflow stream of 2,000 per year and an interest rate of 2.28. Compute the Savings/Investment ratio.

Answer 1

The Savings/Investment ratio for the given project is 2.33.

Step-by-step explanation:

To compute the Savings/Investment ratio, we need to first calculate the total savings generated by the project over its lifetime. The project generates a cashflow of $2,000 per year for 14 years, resulting in a total savings of $28,000. Then, we divide the total savings by the initial investment of $12,000:

Savings/Investment ratio = Total savings / Initial investment = $28,000 / $12,000 = 2.33

Therefore, the Savings/Investment ratio for this project is 2.33.