$500,000 capital investment proposal has an estimated life of four years and no residual value. The minimum desired rate of return for net present value analysis is 12%. The estimated net cash flows and the present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years are as follows: Year Net Cash Flow Present Valueof $1 at 12% 1 $300,000 .893 2 260,000 .797 3 $208,000 .712 4 180,000 .636 Determine the net present value.
$500,000 capital investment proposal has an estimated life of four years and no residual value. The minimum desired rate of return for net present value analysis is 12%. The estimated net cash flows and the present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years are as follows: Year Net Cash Flow Present Valueof $1 at 12% 1 $300,000 .893 2 260,000 .797 3 $208,000 .712 4 180,000 .636 Determine the net present value.
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 $500,000 capital investment proposal has an estimated life of four years and no residual value. The minimum desired
| Year | Net Cash Flow | Present Valueof $1 at 12% |
| 1 | $300,000 | .893 |
| 2 | 260,000 | .797 |
| 3 | $208,000 | .712 |
| 4 | 180,000 | .636 |
Determine the net present value.
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