M Corporation has provided the following data concerning an investment project that it is considering: Initial investment $ 380,

Question

2 years ago

8

M Corporation has provided the following data concerning an investment project that it is considering: Initial investment $ 380,

000 Annual cash flow $ 133,000 per year Expected life of the project 4 years Discount rate 13 % Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:

Business

1 answer:

gtnhenbr [62] · Answer 1 · 2022-09-21T09:40:08+03:00

Answer:

NPV = $262,604.7

Explanation:

<em>The NPV is the difference between the PV of cash inflows and the PV of cash outflows. A positive NPV implies a good investment decision and a negative figure implies the opposite. </em>

NPV of an investment:

NPV = PV of Cash inflows - PV of cash outflow

PV of annuity= 1 -(1+r)^(-n)/r × Annual cash flow

r- discount rate, n- number of years

PV of cashinflow = 133,000 × (1- 1.13^(-4))/0.13 =395,604.6863

NPV = 395,604.6863 - 133,000= 262,604.7

NPV = $262,604.7