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Kai Winn Corporation has provided the following data concerning an investment projectthat it is considering: Initial investment$370,000 Annual cash flow$121,000 per year Expected life of the project4 years Discount rate10% Question: What is the net present value of the project?

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Respuesta :

Answer:

$13,558

Explanation:

The computation of the Net present value is shown below  

= Present value of all annual cash inflows after applying discount factor  - initial investment  

where,  

The Initial investment is $370,000

All yearly cash flows would be

= Annual cash flows × PVIFA for 4 years at 10%  

= $121,000 Ă— 3.1699

= $383,558

Refer to the PVIFA table

The discount factor should be computed by  

= 1 Ă· (1 + rate) ^ years

So, the net present value would be

= $383,558 - $370,000

= $13,558

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