Investment A requires a net investment of $604,021 The required rate of return is 12% for...
Investment A requires a net investment of $604,021 The required rate of return is 12% for the three-year annuity. What are the annual cash inflows if the net present value equals 0? (rounded)
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a)-$1,812,063 |
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B)$2,416,084 |
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C)$604,016 |
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D)$251,466 |
Homework Answers
NPV=Present value of inflows-Present value of outflows
Hence Present value of inflows=604,021
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
604,021=Annuity[1-(1.12)^-3]/0.12
604,021=Annuity*2.40183127
Annuity=604,021/2.40183127
=$251,466(Approx)
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