Type your answer in the box. An investment that costs $5,000 will produce annual

Question

Type your answer in the box. An investment that costs $5,000 will produce annual cash flows of $3,000 for 3 years. Using a required return of 8%, the investment will generate a NPV of $ 1 (rounded to nearest dollar). Present Value of 1 Rate Periods|7% 3% 19% 0.9346 0.92590.9174 0.873410.8573 0.8417 0.8163 10.7938 0.7722 0.7629 0.735010.7084 0.7130 0.6806 0.6499 2 5 Present Value of an Annuity of 1 Rate Periods 7% 8 %9% 0.9346 0.92590,9174 180801.7833 1.7591 2.6243 2.5771 2.5313 3.3872|3.3121 3.2397

Explanation / Answer

npv =-present value of initial cost + present value of cash inflows

= -5000+(3000 *pvif8%,1yr)+(3000 *pvif8%,2yr)+(3000 *pvif8%,3yr)

=-5000+(3000*0.9259)+(3000*0.8573)+(3000*0.7938) (values from table - present value of 1)

=2731

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