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Use the following table, Present Value of an Annuity of 1 Period 8% 9% 10% 1...

Use the following table, Present Value of an Annuity of 1 Period 8% 9% 10% 1 0.926 0.917 0.909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 9%. It is considering investing in a project which costs $270000 and is expected to generate cash inflows of $130000 at the end of each year for three years. The net present value of this project is

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Answer #1

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$130,000*2.531

=$329030

NPV=Present value of inflows-Present value of outflows

=$329030-$270,000

=$59030

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