A project has estimated annual cash flows of $95,000 for 4 years and is estimated to cost $260,000. Assume a minimum acceptable rate of return of 10%. Following is a table for the present value of $1 at compound interest: Year 1 2 3 4 5 2 3 6% 0.943 0.890 0.840 0.792 0.747 4 5 10% 0.909 0.826 0.751 0.683 0.621 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 1 0.943 1.833 2.673 3.465 4.212 10% 12% 0.909 1.736 2.487 3.170 3.791 0.893 0.797 0.712 0.636 0.567 12% 0.893 1.690 2.402 3.037 3.605 a. Determine the net present value of the project. $ b. Determine the present value index. Round your answer to two decimal places. 4

A project has estimated annual cash flows of $95,000 for 4 years and is estimated to cost $260,000. Assume a minimum acceptable rate of return of 10%. Following is a table for the present value of $1 at compound interest: Year 1 2 3 4 5 2 3 6% 0.943 0.890 0.840 0.792 0.747 4 5 10% 0.909 0.826 0.751 0.683 0.621 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 1 0.943 1.833 2.673 3.465 4.212 10% 12% 0.909 1.736 2.487 3.170 3.791 0.893 0.797 0.712 0.636 0.567 12% 0.893 1.690 2.402 3.037 3.605 a. Determine the net present value of the project. $ b. Determine the present value index. Round your answer to two decimal places. 4

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 29P

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