Fimbrez Corporation has provided the following data concerning an investment pro

Question

Fimbrez Corporation has provided the following data concerning an investment project that it is considering: Initial investment $400,000 $130,000 per year Annual cash flow Expected life of the project Discount rate 4 years 9% Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table The net present value of the project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount) to 3 onswers to the nearest dollr

Explanation / Answer

Answer

Year

Cash (outflow)/inflow

Discount factor @9%

Present values

Working

0

(400000)

1

400000.000

Present Value of outflow (A)

1

130000

0.9174312

119266.055

Present Values of Cash inflows (B)

2

130000

0.84168

109418.399

3

130000

0.7721835

100383.852

4

130000

0.7084252

92095.2774

TOTAL (or NPV)

21163.584

(B – A)

Year

Cash (outflow)/inflow

Discount factor @9% (given under 9% column)

Present values

0

-400000

1

400000

1

130000

0.917

119210

2

130000

0.842

109460

3

130000

0.772

100360

4

130000

0.708

92040

TOTAL (or NPV) ([119210+109460+100360+92040] – [400000])

21070

Annual cash Inflow

PV of 9% annuity for 4 year (given under 9% column Year 4)

Present value

130000

3.24

421200

Less

Cash outflow

400000

NPV

21200

Year

Cash (outflow)/inflow

Discount factor @9%

Present values

Working

0

(400000)

1

400000.000

Present Value of outflow (A)

1

130000

0.9174312

119266.055

Present Values of Cash inflows (B)

2

130000

0.84168

109418.399

3

130000

0.7721835

100383.852

4

130000

0.7084252

92095.2774

TOTAL (or NPV)

21163.584

(B – A)

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