Question

Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment $ 30,000 Annual cash inflows $ 6,000 Salvage value of equipment $ 0 Life of the investment 15 years Required rate of return 10 % The net present value of the investment is:

Answer 1

Answer:

Net Present Value of the Project = $15,636.48

Explanation:

Provided information we have,

Initial cost of project = $30,000

Cash Inflow of project = $6,000 each year

Life of project = 15 years

Rate of return required = 10%

Present Value Cumulative Interest factor for 15 years @ 10% = 7.606

Present value of cash inflow = $6,000 $\times$ 7.606 = $45,636.48

Present value of cash outflow = $30,000

Net Present Value = $45,636.48 - $30,000 = $15,636.48