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5.16 Consider the following investment project. n 0 1 2 3 4 5 Ann - $42,000 32,400 33,400 32,500 32,500 33,000 Calculate the net future worth of this investment at 12% and determine the acceptability of the investment.

5.16 Consider the following investment project. n 0 1 2 3 4 5 Ann - $42,000 32,400 33,400 32,500 32,500 33,000 Calculate the net future worth of this investment at 12% and determine the acceptability of the investment.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Can you answer this economics problem please and show work/ excel please

### Investment Analysis Example #### Problem 5.16 Consider the following investment project with the provided cash flow details: | **n** | **A<sub>nn</sub>** | |-------|------------------| | 0 | −$42,000 | | 1 | $32,400 | | 2 | $33,400 | | 3 | $32,500 | | 4 | $32,500 | | 5 | $33,000 | Where: - **n** represents the year of the investment. - **A<sub>nn</sub>** indicates the cash flow for each year in dollars. #### Task Calculate the net future worth of this investment at a 12% interest rate and determine the acceptability of the investment. ### Steps for Calculation: 1. **Initial Outflow**: Begin with the initial investment outflow of −$42,000 at year 0. 2. **Yearly Inflows**: Note the positive cash inflows from year 1 to year 5. 3. **Interest Rate**: Apply a discount rate of 12% for the investment period to find the future value of each cash flow. 4. **Net Future Worth**: Calculate the net future worth by summing the future values of all cash inflows and subtracting the future value of outflows. This approach will determine if the project is financially viable and if its returns exceed the costs when accounting for time value of money.
Transcribed Image Text:### Investment Analysis Example #### Problem 5.16 Consider the following investment project with the provided cash flow details: | **n** | **A<sub>nn</sub>** | |-------|------------------| | 0 | −$42,000 | | 1 | $32,400 | | 2 | $33,400 | | 3 | $32,500 | | 4 | $32,500 | | 5 | $33,000 | Where: - **n** represents the year of the investment. - **A<sub>nn</sub>** indicates the cash flow for each year in dollars. #### Task Calculate the net future worth of this investment at a 12% interest rate and determine the acceptability of the investment. ### Steps for Calculation: 1. **Initial Outflow**: Begin with the initial investment outflow of −$42,000 at year 0. 2. **Yearly Inflows**: Note the positive cash inflows from year 1 to year 5. 3. **Interest Rate**: Apply a discount rate of 12% for the investment period to find the future value of each cash flow. 4. **Net Future Worth**: Calculate the net future worth by summing the future values of all cash inflows and subtracting the future value of outflows. This approach will determine if the project is financially viable and if its returns exceed the costs when accounting for time value of money.
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