Periods Present Value of an Annuity of 1 8% 9% 10% 0

Accounting Aug 20, 2020

Periods Present Value of an Annuity of 1 8% 9% 10% 0.926 0.917 0.909 1.783 1.759 1.736 2.577 2.531 2.487 ?? 2 3 A company has a minimum required rate of return of 9%. It is considering investing in a project that costs $189000 and is expected to generate cash inflows of $76000 at the end of each year for three years. The net present value of this project is $3356. $19236. $192356. O $38000.

Expert Solution

Answer: $ 3,356

Solution: Net present Value = Present value of cash inflow* - Present value of cashh outflow

= $ 192,356 - $ 189,000

= $ 3,356

*Present value of cash inflow = Annual cash inflow X Present value of annuity @ 9% for 3 years

= $ 76,000 X 2.531

= $ 192,356

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