Cornwell Publishers is considering an investment that would require an initial cash outlay of $400,000 and would have no salvage value.The project would generate annual cash inflows of $75,000.The firm's discount rate is 8 percent.How many years must the annual cash flows be generated for the project to generate a net present value of $0? Present value tables or a financial calculator are required.

Question

Quizplus · Accepted Answer

The net present value (NPV) is calculated by finding the present value of the cash inflows and subtracting the initial investment. Using the present value of an annuity formula or table for 8% discount rate, the project needs to generate cash flows for between 7 and 8 years to achieve an NPV of $0.

Cornwell Publishers Is Considering an Investment That Would Require an Initial