Answer:
- The net present worth of the expected cash flow is most nearly
$514,950
Explanation:
To find the Net Present Worth of the cash flow it's necessary to applied the Present Value formula which indicates:
Present Value = CF / (1 + r)^t
CF: Each Cash Flow
r : Rate of Return
t : Each moment when the Cash Flow are received.
Total Present Value : -101.695 - 86.182 + 146.071 + 123.789 + 104.906 + 88.904 + 75.342 + 63.849 + 54.109 + 45.855 = $514.950
Period: Year 1 Year 2
Net Operating -$120,000 -$120,000
Rate: (1+0,18)^1 (1+0,18)^2
Net Present Value -$101,695 -$86,182
Period: Year 3 Year 4
Net Operating $240,000 $240,000
Rate: (1+0,18)^3 (1+0,18)^4
Net Present Value $146,071 $123,789
Period: Year 5 Year 6
Net Operating $240,000 $240,000
Rate: (1+0,18)^5 (1+0,18)^6
Net Present Value $104,096 $88,904
Period: Year 7 Year 8
Net Operating $240,000 $240,000
Rate: (1+0,18)^7 (1+0,18)^8
Net Present Value $75,342 $63,849
Period: Year 9 Year 10
Net Operating $240,000 $240,000
Rate: (1+0,18)^9 (1+0,18)^10
Net Present Value $54,109 $45,855
