Moates Corporation has provided the following data concerning an investment project that it is considering:
Initial investment | $ | 200,000 | |
Annual cash flow | $ | 123,000 | per year |
Expected life of the project | 4 | years | |
Discount rate | 10 | % | |
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.
The net present value of the project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Solution
Moates Corporation
Computation of net present value of the project:
Net present value = present value of cash inflows – present value of cash outflows
Since, the project results in uniform annual cash flows,
The present value of annual cash flows is computed as follows,
Annual cash flows x (P/A, 10%, 4)
= $123,000 x (P/A, 10%, 4)
= 123,000 x 3.17 = $389,910
Less: initial investment $200,000
Net Present Value = $189,910
Moates Corporation has provided the following data concerning an investment project that it is considering: Initial...
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