Easy Appliances Inc. is considering a new inventory system that will cost $100,000. The system is expected to generate positive
cash flows over the next four years in the amounts of $30,000 in year one, $35,000 in year two, $45,000 in year three, and $25,000 in year four. Easy Appliances required rate of return is 10%. What is the net present value of this project to the nearest ten dollars? a. $7,080 b. $10,930 c. $23,090 d. $ 9,460
1 answer:
Answer:
a. $7,080
Explanation:
Net Present Value is the sum of present value of all the cash inflows and outflows using a required rate of return. It is calculated by discount each cash flow and adding up at the end. It tells us the net worth of any project or product in present value term.
Net Present value of this Inventory system is $7,083 or $7080 rounding off to nearest tens.
Calculation and working are attached with this answer please find it.
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Solution :
Initial amount is : $1091 .
Rate, r = 0.12 .
Let, amount will be $1728 in t years.
So,
Hence, this is the required solution.