Patterson Publishers is considering an investment that would require an initial cash outlay of $400,000 and would have no salvage value

Accounting Mar 13, 2021

Patterson Publishers is considering an investment that would require an initial cash outlay of $400,000 and would have no salvage value. The project would generate annual cash inflows of $75,000. The firm's discount rate is 8 percent. How many years must the annual cash flows be generated for the project to generate a net present value of $0? Present value tables or a financial calculator are required.

between 5 and 6 years
between 6 and 7 years
between 7 and 8 years
between 8 and 9 years

Expert Solution

Answer:

A . between 5 and 6 years

Step-by-Step explanation

Annuity Factor for 5 years =5.866 at a discount rate of 8%.

so, Net present value = $ o only when between 5 and 6 years.

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