Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each requires an initial investment of $14,700 and will produce cash flows as follows: End of year Investment A Investment B 1 $9300 $0 2 $9300 $0 3 $9300 $27900 The present value factors of $1 each year at 15% are: 1 0.8696 2 0.7561 3 0.6575 The present value of an annuity of $1 for 3 years at 15% is 2.2832 The net present value of Investment A is: (The answer is $6534 but I do not know how to get there)
Alfarsi Industries uses the
End of year Investment A Investment B
1 $9300 $0
2 $9300 $0
3 $9300 $27900
The present value factors of $1 each year at 15% are:
| 1 | 0.8696 |
| 2 | 0.7561 |
| 3 | 0.6575 |
The present value of an annuity of $1 for 3 years at 15% is 2.2832
The net present value of Investment A is:
(The answer is $6534 but I do not know how to get there)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
