Required information The following information applies to the que Park Co. is co

Question

Required information The following information applies to the que Park Co. is considering an investment that requires immediate payment of $29,160 and provides expected cash inflows of stions displayed below. $9,200 annually for four years. If Park Co. requires a 8% return on its investments. 1-a. What is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.) Factor Present Value S 30,471 29,160 1,311 Cash Flow Select Chart Amountx PV Annual cash flow Present Value of an Annuity of 19,2003.3121 Immediate cash outflows Net present value

Explanation / Answer

Net Present Value [ NPV] of the Investment = $1,311.57

Net Present Value [ NPV] = Present Value of Annual cash inflows – Initial Investments

= $9,200 x [PVIF 8%, 4 Years] - $29,160

= [$9,200 x 3.312127 ] - $29,160

= $30471.57 – 29,160

= $1,311.57

Internal Rate of Return (IRR) = 10%

Internal Rate of Return Factor = Net Initial Investment / Annual Cash Flow

= $29,160 / 9,200

                                                = 3.169565

From the Present Value Annuity Factor Table, We can find that the discount rate (IRR) corresponding to the factor of 3.169565 for 4 Years Will be approximately 10%

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