Question

A project that will last for 12 years is expected to have equal annual cash flows of $104,500. If the required return is 8.2 percent, what maximum initial investment would make the project acceptable

Answer 1

Answer:

$779,424.31

Explanation:

To determine the maximum initial investment would make the project acceptable, we have to find the present value of the cash flows.

Present value is the sum of discounted cash flows.

Cash flow each year from year 1 to 12 = $104,500

I = 8.2%

Present value = $779,424.31 

To find the PV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you