could you please answer this question and put the steps :) Thankk you !!! Net Pr

Question

could you please answer this question and put the steps :) Thankk you !!!

Net Present Value A project has estimated annual net cash flows of $10,000 for six years and is estimated to cost $30,000. Assume a minimum acceptable rate of return of 20%. Use the Present Value of an Annuity of $1 at compound interest table below Present Value of an Annuity of $1 at Compound Interest 690 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 Year 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 1290 0.893 1.690 2.402 3.037 3.605 1 590 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.564 4.968 5.328 5.650 8 10 Determine (1) the net present value of the project (if required, round to the nearest dollar) and (2) the present value index (rounded to two decimal places). If required, use the minus sign to indicate a negative net present value Net present value of the project Present value index

Explanation / Answer

NPV :-

(Annual cash Flow * PVAF) – Initial Investment

Annual cash flow = 10000

PVAF @ 20% for 6 years = 3.326

Initial Investment = 30000

NPV = (10000 * 3.326) – 30000 = 3260

Present Value Index = PV of cash inflow/Initial Investment

    = (10000 * 3.326)/30000 = 1.11

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