Q9QS
Expert-verifiedIf Quail Company invests $50,000 today, it can expect to receive $10,000 at the end of each year for the next seven years, plus an extra $6,000 at the end of the seventh year. What is the net present value of this investment assuming a required 10% return on investments? (Round present value calculations to the nearest dollar.)
The net present value of the project is $1,763
The net present value is defined as the difference between the present value of the cash inflows and the present value of cash outflows.
Chart Values are based on: | ||||||
N = 7, I = 10% | ||||||
Cash Flow | Select chart | Amount | X | PV Factor | = | Present Value |
Annual cash flow | Present value of an annuity of 1 | 10,000 | X | 4.8684 |
| 48,684 |
Residual Value | Present value of 1 | 6,000 | X | 0.5132 |
| 3,079 |
Present values of cash inflows | 51,763 | |||||
Immediate cash outflows | -50,000 | |||||
Net present value | 1,763 |
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