Question

Odeletta Corporation is considering an investment of in a land development project. The investment will yield cash inflows of per year for five years. The company uses a discount rate of​ 9%. What is the net present value of the​ investment?

Answer 1

Answer: $337,800

Step-by-step explanation:

Cashflow is constant so is an annuity.

The Present value of the Investment;

= Present Value of Cashflow - Investment cost

= (220,000 * Present value interest factor of an annuity, 5 years, 9% ) - 518,000

= (220,000 * 3.89) - 518,000

= 855,800 - 518,000

= $337,800