Present value of Annuity of $1 Present value of $1 Future value of annuity of $1

Question

Present value of Annuity of $1 Present value of $1 Future value of annuity of $1 Future value of $1 Autumn Music is considering investing $600,000 in private lesson studios that will have no residual value. The studios are expected to result in annuaf net cash inflows of $75,000 per year for the next ten years. Assuming that Autumn Music uses a 10% hurdle rate, what is the net present value (NPV) of the studio investment? Is this a favorable investment? (Click the icon to view the present value Click the icon to view the present value of an annuity table) table.) (Click the icon to view the future value (Click the icon to view the future value of an annuity table.) table.)

Explanation / Answer

Net present value = (75000*6.145)-600000= -139125 No, this is not a favorable investment as NPV is negative

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