Answer:
d. positive $25,200
Explanation:
The computation of the Net present value is shown below
= Present value of all yearly cash inflows after applying discount factor - initial investment
The discount factor should be computed by
= 1 ÷ (1 + rate) ^ years
where,
rate is 10%
Year = 0,1,2,3,4 and so on
Discount Factor:
Year 1 = 0.909
Year 2 = 0.826
Year 3 = 0.751
Year 4 = 0.683
Year 5 = 0.621
So, the calculation of a Present value of all yearly cash inflows are shown below
= Year 1 cash inflow × Present Factor of Year 1 + Year 2 cash inflow × Present Factor of Year 2 + Year 3 cash inflow × Present Factor of Year 3 + Year 4 cash inflow × Present Factor of Year 4 + Year 5 cash inflow × Present Factor of Year 5
= $180,000 × 0.909 + $120,000 × 0.826 + $100,000 × 0.751 + $90,000 × 0.683 + $90,000 × 0.621
= $163,620 + $99,120 + $75,100 + $61,470 + $55,890
= $455,200
So, the Net present value equals to
= $455,200 - $430,000
= $25,200
