The following table is for the present value of $1 at compound interest.Year6%10%12%10.943 0.909 0.893 20.890 0.826 0.797 30.840 0.751 0.712 40.792 0.683 0.636 50.747 0.621 0.567 The following table is for the present value of an annuity of $1 at compound interest.Year6%10%12%10.943 0.909 0.893 21.833 1.736 1.690 32.673 2.487 2.402 43.465 3.170 3.037 54.212 3.791 3.605 Using these tables, if an investment is made now for $20,000 that will generate a cash inflow of $8,000 a year for the next 4 years, what would be the net present value (rounded to the nearest dollar) of the investment, assuming an earnings rate of 10%?

Calculate the present value of cash flows.

Answered: The following table is for the present…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following table is for the present value of $1 at compound interest.

Year	6%	10%	12%
1	0.943		0.909	0.893
2	0.890		0.826	0.797
3	0.840		0.751	0.712
4	0.792		0.683	0.636
5	0.747		0.621	0.567

The following table is for the present value of an annuity of $1 at compound interest.

Year	6%	10%	12%
1	0.943		0.909	0.893
2	1.833		1.736	1.690
3	2.673		2.487	2.402
4	3.465		3.170	3.037
5	4.212		3.791	3.605

Using these tables, if an investment is made now for $20,000 that will generate a cash inflow of $8,000 a year for the next 4 years, what would be the net present value (rounded to the nearest dollar) of the investment, assuming an earnings rate of 10%?

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