Net Present ValueA project has estimated annual net cash flows of $6,250 for eight years and is estimated to cost $37,500. Assume a minimum acceptable rate of return of 15%. Usethe Present Value of an Annuity of $1 at Compound Interest table below.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.5282.6732.4872.4022.2832.10643.4653.1703.0372.8552.58954.2123.7913.6053.3532.9914.9174.3554.1113.7853.32675.5824.8684.5644.1603.60586.2105.3354.9684.4873.8379.6.8025.7595.3284.7724.031107.3606.1455.6505.0194.192Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value.Net present value of the project (round to the nearest dollar)Present value index (rounded to two decimal places)FeedbackV Check My Worka. Multiply the present value factor for an annuity of $1 factor for eight years and 15% by the annual net cash flow. Subtract the amount to be invested.

We are given the cash flow figures and the annual cash inflow of 6250 is in the form of an annuity.…

Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places)

Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Net Present Value
A project has estimated annual net cash flows of $6,250 for eight years and is estimated to cost $37,500. Assume a minimum acceptable rate of return of 15%. Use
the Present Value of an Annuity of $1 at Compound Interest table below.
Present Value of an Annuity of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589
5
4.212
3.791
3.605
3.353
2.991
4.917
4.355
4.111
3.785
3.326
7
5.582
4.868
4.564
4.160
3.605
8
6.210
5.335
4.968
4.487
3.837
9.
6.802
5.759
5.328
4.772
4.031
10
7.360
6.145
5.650
5.019
4.192
Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value.
Net present value of the project (round to the nearest dollar)
Present value index (rounded to two decimal places)
Feedback
V Check My Work
a. Multiply the present value factor for an annuity of $1 factor for eight years and 15% by the annual net cash flow. Subtract the amount to be invested.

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