Question

A capital budgeting project has a net investment of $415,000 and is expected to generate net cash flows of $138,000 annually for 4 years. What is the net present value at a 11% required rate of return?

Answer 1

Answer:

the net present value is $13,131

Explanation:

The computation of the net present value is shown below

As we know that

Net present value = Annual cash inflows × PVIFA factor for 4 years at 11% - Initial investment

= $138,000 × 3.1024 - $415,000

= $428,131 - $415,000

= $13,131

Hence, the net present value is $13,131

We simply applied the above formula so that the correct value could come

And, the same is to be considered