Question

Kai Winn Corporation has provided the following data concerning an investment projectthat it is considering: Initial investment$370,000 Annual cash flow$121,000 per year Expected life of the project4 years Discount rate10% Question: What is the net present value of the project?

Answer 1

$13,558

Step-by-step explanation:

The computation of the Net present value is shown below

= Present value of all annual cash inflows after applying discount factor - initial investment

where,

The Initial investment is $370,000

All yearly cash flows would be

= Annual cash flows × PVIFA for 4 years at 10%

= $121,000 × 3.1699

= $383,558

Refer to the PVIFA table

The discount factor should be computed by

= 1 ÷ (1 + rate) ^ years

So, the net present value would be

= $383,558 - $370,000

= $13,558