Question

A project with an initial investment of $449,300 will generate equal annual cash flows over its 10-year life. The project has a required return of 8.9 percent.
1. What is the minimum annual cash flow required to accept the project?
O $74,638.31O $64,435.34O $79,659.56O $66,657.24O $69,702.11

Answer 1

Answer:

Cash flow per year to achieve the required return on investment: $69,702.11

Explanation:

We have to solve for which cashinflow makes an annuity of 10-year discount at 8.9% equal to our 449,300 dollars invested:

$PV \div \frac{1-(1+r)^{-time} }{rate} = C$

PV 449,300

time   10 years

rate     0.089 per year

$449300 \div \frac{1-(1+0.089)^{-10} }{0.089} = C$

C  $ 69,702.112