Net Present Value A project has estimated annual net cash flows of $70,000 for f

Question

Net Present Value

A project has estimated annual net cash flows of $70,000 for four years and is estimated to cost $190,000. Assume a minimum acceptable rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below.

Determine (1) the net present value of the project and (2) the present value index. If required, use the minus sign to indicate a negative net present value.

Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Amount Net cash flows per year                           70,000.00 PVF for 4 years                                      3.17 Present Value of cash inflows                         221,900.00 Present Value of cash outflows                      (190,000.00) Net present value = 221900 - 190000                           31,900.00 Present value index = 221900/190000                                      1.17

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