Answer:
NPV ($4,452)
Explanation:
The net present value of the investment made can be calculated as under:
NPV = (Annual Net Cash inflow * Annuity Factor at 9% for 3 years) - Initial investment
Here
Initial investment is $69,000
The depreciation is the non cash item which must be removed so the annual cash inflow would be:
Annual Net Cash inflow = $2,500 + $23,000 Non cash item = $25,500
The annuity factor at 9% for three years is given and is 2.5313
So putting above value in the equation, we have:
Net Present Value = ($25,500 * 2.5313) - $69,000
Net Present Value = $64,548 - $69,000
Net Present Value = ($4,452)
