Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

A project has estimated annual net cash flows of $15,000 for two years and is es

ID: 2535020 • Letter: A

Question

A project has estimated annual net cash flows of $15,000 for two years and is estimated to cost $50,000. Assume a minimum acceptable rate of return of 6%. Use the Present Value of an Annuity of $1 at Compound Interest table below.

Determine (1) the net present value of the project (if required, round to the nearest dollar) and (2) the present value index (rounded to two decimal places). If required, use the minus sign to indicate a negative net present value.

Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192

Explanation / Answer

cash outflow

-50000

Year

cash flow

present value of cash flow = cash flow/(1+r)^n r = 6%

0

-50000

-50000

1

15000

14150.9434

2

15000

13349.9466

NPV =sum of present value of cash flow

-22499.11

Benefit cost ratio

sum of present value of cash inflow/cash outflow

(14150.94+13349.94)/50000

0.55

cash outflow

-50000

Year

cash flow

present value of cash flow = cash flow/(1+r)^n r = 6%

0

-50000

-50000

1

15000

14150.9434

2

15000

13349.9466

NPV =sum of present value of cash flow

-22499.11

Benefit cost ratio

sum of present value of cash inflow/cash outflow

(14150.94+13349.94)/50000

0.55

Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
Chat Now And Get Quote