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A new investment project currently under consideration has a negative net present value of $85,000. The project has a life of 10 years and the minimum required rate of return is 8%. The present value factor
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21 votes
A new investment project currently under consideration has a negative net present value of $85,000. The project has a life of 10 years and the minimum required rate of return is 8%. The present value factor for an annuity at 8% for 10 periods is 6.71. What is the amount of annual additional cash flow that is required to make this investment attractive

User ArVan
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1 Answer

13 votes
13 votes

Answer:

$12,668

Step-by-step explanation:

Calculation to determine the amount of annual additional cash flow that is required to make this investment attractive

Using this formula

Annual additional cash flow required=Negative net present value /Present value factor for an annuity at 8% for 10 periods

Let plug in the formula

Annual additional cash flow required= $85,000/6.71

Annual additional cash flow required= $12,668

Therefore the amount of annual additional cash flow that is required to make this investment attractive is $12,668

User Manikandan Rajendran
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3.2k points
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