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Determine the net present value of project one

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Reference no: EM133140110

Question - Project 1 requires an original investment of $46,100. The project will yield cash flows of $13,000 per year for 5 years. Project 2 has a computed net present value of $9,600 over a three-year life. Project 1 could be sold at the end of three years for a price of $51,000.

Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below.

Present Value of $1 at Compound Interest

Year

6%

10%

12%

15%

20%

1

0.943

0.909

0.893

0.870

0.833

2

0.890

0.826

0.797

0.756

0.694

3

0.840

0.751

0.712

0.658

0.579

4

0.792

0.683

0.636

0.572

0.482

5

0.747

0.621

0.567

0.497

0.402

6

0.705

0.564

0.507

0.432

0.335

7

0.665

0.513

0.452

0.376

0.279

8

0.627

0.467

0.404

0.327

0.233

9

0.592

0.424

0.361

0.284

0.194

10

0.558

0.386

0.322

0.247

0.162

 

Present Value of an Annuity of $1 at Compound Interest

Year

6%

10%

12%

15%

20%

1

0.943

0.909

0.893

0.870

0.833

2

1.833

1.736

1.690

1.626

1.528

3

2.673

2.487

2.402

2.283

2.106

4

3.465

3.170

3.037

2.855

2.589

5

4.212

3.791

3.605

3.353

2.991

6

4.917

4.355

4.111

3.785

3.326

7

5.582

4.868

4.564

4.160

3.605

8

6.210

5.335

4.968

4.487

3.837

9

6.802

5.759

5.328

4.772

4.031

10

7.360

6.145

5.650

5.019

4.192

Required - Determine the net present value of Project 1 over a three-year life with residual value, assuming a minimum rate of return of 20%. If required, round to the nearest dollar.

Reference no: EM133140110

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