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allochka39001 [22]
1 year ago
5

An investment that costs $5,800 will produce annual cash flows of $2,480 for a period of 4 years. Given a desired rate of return

of 9%, what is the present value index?
Business
1 answer:
aleksandrvk [35]1 year ago
8 0

Based on the present value of the annual cash flows and the investment cost, the present value index is 1.39

<h3>How is the present value index calculated?</h3>

To find the present value index, use the formula:

= Present value of cash flow/Investment cost

The present value of cash flow is:

= Annual cash flows x Present value interest factor of annuity, 9%, 4 years

= 2,480 x 3.239719877

= $8,034.51

The present value index is:

= 8,034.51 / 5,800

= 1.39

Find out more on present value index at brainly.com/question/23259683

#SPJ1

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