Question

The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively. Determine the net present value. $

Answer 1

Answer: $18,848

Step-by-step explanation:

The Net Present Value of a project is the difference between the present values of the cash outflows and inflows.

Present Values of the Cash flows;

Year 1

= 150,000 * 0.893

= $133,950

Year 2

= 130,000 * 0.797

= $103,610

Year 3

=104,000 * 0.712

= $74,048

Year 4

= 90,000 * 0.636

= $57,240

Net Present Value = Cash inflows - Outflow

= 133,950 +103,610 + 74,048 + 57,240 - 350,000

= $18,848