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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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:
6%
0.943
0.909
0.890
0.826
0.840
0.751
0.792
0.683
0.747
0.621
Following is a table for the present value of an annuity of $1 at compound interest:
Year
10%
1
0.909
2
1.736
3
2.487
3.170
3.791
Year
1
2
3
4
5
4
5
6%
0.943
1.833
2.673
3.465
4.212
10%
12%
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.
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