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Paul Company is considering purchasing a capital investment that is expected to provide annual cash inflows...

Paul Company is considering purchasing a capital investment that is expected to provide annual cash inflows of $12,000 per year for 3 years. Assuming that the required rate of return is 10%, what is the present value of these cash inflows? Use Appendix Table 2. (Do not round PV factors and intermediate calculations. Round your final answer to the nearest dollar.)

Multiple Choice

  • $27,047

  • $9,016

  • $28,822

  • $29,842

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Answer #1

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

=$12000[1-(1.1)^-3]/0.1

=$12000*2.486851991

=$29842(Approx).

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