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M Corporation has provided the following data concerning an investment project that it is considering: Initial...

M Corporation has provided the following data concerning an investment project that it is considering:

Initial investment $ 270,000
Annual cash flow $ 125,000 per year
Expected life of the project 4 years
Discount rate 10 %

The net present value of the project is closest to:

  • $126,125 A

  • $(126,125) B

  • $(145,000) C

  • $270,000 D

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Homework Answers

Answer #1

Ans:Option A.$126,125 is Correct Answer

1.

Ans:

Present value of Net cash flow

$396125

Amount to be invested

$270,000

Net Present Value

$126125

Working Note:

Calculation of NPV

Year

Net Cash flow

PV Factor @ 10%

PV

1

125000

0.909

113625

2

125000

0.826

103250

3

125000

0.751

93875

4

125000

0.683

85375

Present value

396125
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