End of Year Income PV Calculation at 14% (Show work here) PV at 14% (Show result
ID: 2764054 • Letter: E
Question
End of Year
Income
PV Calculation at 14%
(Show work here)
PV at 14%
(Show result here)
1
$90
2
$90
3
$90
4
$1,090
Total present value:
315.79
a. Fill in the table to calculate the present value of this investment at a 14% discount rate.
b. Under what circumstances would this investment be acceptable? Give a numerical answer specific to the scenario in this question.
End of Year
Income
PV Calculation at 14%
(Show work here)
PV at 14%
(Show result here)
1
$90
2
$90
3
$90
4
$1,090
Total present value:
315.79
Explanation / Answer
a) Present Value at 14% = $854.31
b) A project is acceptable only if the present value of acsh inflows is greater that present value of cash outflows, i.e. NPV should be greater than 0. Therefore this project would be acceptable only if the cost to be incurred for the project is less than $854.31
Year PV Work PV Factor Present Value 1 90 1/1.14 0.877193 78.95 2 90 1/(1.14)^2 0.769468 69.25 3 90 1/(1.14)^3 0.674972 60.75 4 1090 1/(1.14)^4 0.59208 645.37 Total Present Value 854.31Related Questions
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