Question

The initial cost of an investment is $65,000 and the cost of capital is 10%. The return is $16,000 per year for 8 years. What is the net present value

Answer 1

Answer: $‭20,358.4‬0

Explanation:

Find the present value of the $16,000 for the 8 years. This is an annuity so;

Present value = 16,000 * Present value interest factor of annuity, 8 years, 10%

= 16,000 * 5.3349

= $‭85,358.4‬0

Subtract cost;

= ‭85,358.4‬0 - 65,000

= $‭20,358.4‬0