Question

Clean Tel, Inc. is considering investing in an 11-year project with annual cash inflows of $1,000,000. These cash inflows have an initial investment of $7,139,000. At what discount rate would this present value be the same as the initial investment

Answer 1

8%

Step-by-step explanation:

Use the Time Value of Money Techniques to find the discount rate as follows:

Pmt = $1,000,000

Pv = - $7,139,000

Fv = $0

P/yr = 1

N = 11

I = ?

Using a financial calculator to input the values as above, the discount rate (i) to be used is 8%