Homework Answers
Determining the Present value of the Future cash inflows:
| Year | Cash flows | Disc @ 14% | Discounted Cash flows |
| 1 | $3,037.50 | 0.8772 | $2,664.47 |
| 2 | $3,037.50 | 0.7695 | $2,337.26 |
| 3 | $3,037.50 | 0.6750 | $2,050.23 |
| 4 | $3,037.50 | 0.5921 | $1,798.44 |
| 5 | $3,037.50 | 0.5194 | $1,577.58 |
| Total | $10,427.98 |
Computation of Net Present Value:
| Particulars | Amount |
| PV of the future cash inflows | $10,427.98 |
| less: Initial Investmeny | $9,000 |
| Net Present Value | $1,427.98 |
Hence Net Present value is $ 1427.98.So Option a) 1427.98 is correct.
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