Homework Answers
Investment = $5,000
Annual cash inflow = $2,000
Time period (n) = 4 years
Interest rate (i) = 8%
Present value of cash inflow= Annual cash inflow x Present value annuity factor ( i%,n)
= 2,000 x Present value annuity factor (8%,4)
= 2,000 x 3.31213
= $6,624.26
Present value index = Present value of cash inflow/Investment
= 6,624.26/5,000
= 1.325
Fourth option is correct option.
Kindly comment if you need further assistance. Thanks‼!
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