Question

Using the tables above, if an investment is made now for $17,550 that will generate a cash inflow of $5,850 a year for the next four years, what would be the net present value (rounded to the nearest dollar) of the investment, assuming an earnings rate of 10%

Answer 1

$993.71

Step-by-step explanation:

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

Cash flow in year 0 = $-17,550

Cash flow each year from year 1 to 4 = $5,850

I = 10%

NPV = $993.71

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