. Below is a table for the present value of$1 at Compound interest. Year 1096 12

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Below is a table for the present value of$1 at Compound interest. Year 1096 1296 0.797 0.712 0.636 0.792 0.747 0 683 Below is a table for the present value of an annuity of $i at compound interest. Year 69% 0.943 1.833 2.673 3465 4.212 109% 0.909 1.736 2.487 3.170 3.791 0.893 1.690 2.402 3.037 3.605 Using the tables above, if an investment is made now for $19.586.00 that will generate a cash intlow of $2.350.32 a year for the next 4 years,what would be the net present value (rounded to the nearest dollar) of the investment (assuming an earnings rate of 12%)? Select the correct answer

Explanation / Answer

NPV = - $12,448..........(rounded to nearest dollar)

the following is the calculation of NPV:

Year Cash flow Discounting factor Discounted cash flow 0 - $19,586.00 (outflow) 1 - $19,586.00 1 - 4 $2,350.32 (inflow) 3.037....(12% for 4 years annuity factor) $7,137.92184 net present value - $12,448

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