Sloan Inc. recently invested in a project with a 3 year life span. The net prese

Question

Sloan Inc. recently invested in a project with a 3 year life span. The net present value was $6,000 and annual cash inflows were $14,000 for year 1; $16,000 for year 2; and $18,000 for year 3. The initial investment for the project, assuming a 15% required rate of return, was
...................................Present Value.....Present Value
.................Year..............of 1 at 15%........of 1 at 15%
...................1.....................870...................870
...................2.....................756................1.626
...................3 ....................658................2.283

a $19,488
b $30,120
c $25,584
d $30,528

Explanation / Answer

Sloan Inc. recently invested in a project with a 3 year life span. The net present value was $6,000 and annual cash inflows were $14,000 for year 1; $16,000 for year 2; and $18,000 for year 3. The initial investment for the project, assuming a 15% required rate of return, was ...................................Present Value.....Present Value .................Year..............of 1 at 15%........of 1 at 15% ...................1.....................870...................870 ...................2.....................756................1.626 ...................3 ....................658................2.283 b $30,120

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