Vaughn Company has the following information about a potential capital investmen

Question

Vaughn Company has the following information about a potential capital investment Initial investment Annual cash inflow Expected life Cost of capital $ 380,000 $ 82,000 9 years 15% appreprss Fate value Auis ot nrlect EMture Valye ofts1 1. Calculate the net present value of this project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(S) from the tables provided. Round the final answer to nearest whole dollar.) Net Present Value

Explanation / Answer

Present Value of annual cash inflows $       3,91,270 Less:Initial Investment $       3,80,000 Net present value $           11,270 Working: Cumulative discount factor = (1-(1+i)^-n)/i Where = (1-(1+0.15)^-9)/0.15 i 15% = 4.771584 n 9 Present Value of annual cash inflows = Annual Cash inflows x cumulative discount factor = $           82,000 x 4.771584 = $       3,91,270

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