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Dear sir,
I found this question in the book:
the details of an investment project are as follow:
cost of asset bought ate start of the project $80 000
annual cash inflows $25,000
cost capital 5% each year
Life of the project 8 years.the present value of the project is:
A -$120,000
B $120,000
C $81575
D -$81575personally I got a D -$81,575 but the real answer is C. i dont understand
The present value of the inflows is 25,000 x 6.463 (the 5% annuity factor) = 161575
The present value of the outflow is 80,000The net present value is PV inflows minus PV outflows = 161575 – 80000 = 81575.
(If you have not yet watched it, then do watch my free lecture on this.)
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