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Moates Corporation has provided the following data concerning an investment project that it is considering: Initial investment$380,000 Annual cash flow $133,000per year Expected life of the project 4years Discount rate 13% The net present value of the project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount
Moates Corporation has provided the following data concerning an investment project that it is considering:
Initial investment$380,000
Annual cash flow $133,000per year
Expected life of the project 4years
Discount rate 13%
The net present value of the project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Multiple Choice
- $15,542
- $380,000
- $(247,000)
- $(15,542)
Expert Solution
Computation of Net Present Value of the Project:
Net Present Value of the Project = Present Value of Annual Cash Flows - Initial Investment
Here,
Present Value of Annual Cash Flows = Annual Cash Flow * Annuity factor for 4 years at 13% = $133,000*2.974 = $395,542
Initial Investment = $380,000
Net Present Value of the Project = $395,542 - $380,000 = $15,542
So, the correct option is 1st "$15,542".
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