Question

Nu Things, Inc., is considering an investment in a business venture with the following anticipated cash flow results:

EOY Cash Flow
0 -$105,000
1 $26,000
2 $25,000
3 $24,000
4 $23,000
5 $22,000
6 $21,000
7 $20,000
8 $19,000
9 $18,000
10 $17,000
11 $16,000
12 $15,000
13 $14,000
14 $13,000
15 $12,000
16 $11,000
17 $10,000
18 $9,000
19 $8,000
20 $7,000

Assume MARR is 20% per year. Based on an external rate of return analysis.

Required:
Determine the investment's present worth.

Answer 1

$-1304.20

Step-by-step explanation:

We are to calculate the Net present value of the investment

Net present value is the present value of after-tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator

0 -$105,000

1 $26,000

2 $25,000

3 $24,000

4 $23,000

5 $22,000

6 $21,000

7 $20,000

8 $19,000

9 $18,000

10 $17,000

11 $16,000

12 $15,000

13 $14,000

14 $13,000

15 $12,000

16 $11,000

17 $10,000

18 $9,000

19 $8,000

20 $7,000

I = 20%

NPV= $-1,304.20

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute