Question

Park Co. is considering an investment that requires immediate payment of $32,500 and provides expected cash inflows of $11,800 annually for four years. If Park Co. requires a 5% return on its investments. What is the net present value of this investment? (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) 1-a Cash Flow Select Chart Amountx x PV FactorPresent Value Annual cash flow 0 Net present value 1-b Based on NPV alone, should Park Co. invest? O Yes O No

Answer 1

Requirement 1-a

Cash flow	Select Chart	Amount	x	PV Factor	=	Present Value
Annual Cash flow		11800.00	x	3.545951	=	$ 41,842.22
	Initial Outflow					$ 32,500.00
	Net present value					$    9,342.22

Net present value may differ a little due to rounding off of PV factor. Please use the PV factor given to you in the table as you did not provide me the table.

Requirement 1-b

Answer- Yes

Company should invest as the present value is positive.