The Horizon Company will invest $77,000 in a temporary project that will generat

Question

The Horizon Company will invest $77,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

  

  

Compute the net present value if the cost of capital is 9 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)

  

  

The Horizon Company will invest $77,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Explanation / Answer

a.computation of net present value

b. since the net present value is positive so investment should be undertaken

year cash flow PVF@9% Present value 0 (77,000) 1 (77,000) 1 21,000 0.917 19,257 2 34,000 0.842 28,628 3 40,000 0.772 30,880 Net present value 1,765

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