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musickatia [10]
2 years ago
9

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all invest

ments. The company is considering two different investments. Each require an initial investment of $15,000 and will produce cash flows as follows:
Business
1 answer:
Katen [24]2 years ago
5 0

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,000 and will produce cash flows as follows: Net present value = Present value of investment - Initial investment

Net present value = $18,951 - $15,300

Net present value = $3,651

<h3>What is net present value method?</h3>

The difference between the current value of cash inflows and withdrawals over a period of time is known as net present value (NPV). To evaluate the profitability of a proposed investment or project, NPV is used in capital budgeting and investment planning. The outcome of computations to determine the current value of a stream of payments in the future is NPV.

  • The current value of a future stream of payments from a business, project, or investment is determined using net present value, or NPV.
  • You must predict the timing and size of future cash flows in order to determine NPV, and you must choose a discount rate that is equal to the least allowable rate of return.

The discount rate can represent your capital costs.

To learn more about net present value method from the given link:

brainly.com/question/13228231

#SPJ4

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