Answer:
Net present value = $3,749
so correct option is $3,749
Explanation:
given data
Present value of cash outflow = $40,500
annual cash inflow = $12,100
useful life = 4 years
rate on return = 12 %
present value of an annuity = $1
to find out
net present value
solution
we know here Present value annuity factor @12% for 4 years is given as
Present value annuity factor @12% for 4 years = 3.0373
so we get here Present value of cash inflow that is express as
Present value of cash inflow = Annual cash flow × Present value annuity .........................1
put here value we get
Present value of cash inflow = $12,100 × 3.0373
Present value of cash inflow = $36,751
so now we get Net present value that is express as
Net present value = Present value of cash outflow - Present value of cash inflow .................2
put here value we get
Net present value = $40,500 - $36,751
Net present value = $3,749
so correct option is $3,749
