QS 24-9 Computation of net present value LO P3 If Quail Company invests $57,000

Question

QS 24-9 Computation of net present value LO P3 If Quail Company invests $57,000 today, it can expect to receive $12,000 at the end of each year for the next four years, plus an extra S6,800 at the end of the fourth year. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign.) What is the net present value of this investment assuming a required 10% return on investments? Chart Values are Based on: ash Flow Select Chart Amount X PV Factor Present Value Residual value Net present value

Explanation / Answer

n= 4 i= 10% Annual cash flow Present Value of an Annuity of 1 12000 X 3.1699 = 38039 Residual value Present Value of 1 6800 X 0.683 = 4644 Present value of cash inflows 42683 Immediate cash outflows -57000 Net present value -14317

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