An investment that costs $33,000 will produce annual cash flows of $11,020 for a period of 4 years. Given a desired rate of return of 9%, what will the investment generate?(PV of $1and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round your answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

To determine the net present value (NPV) of the investment, we first calculate the present value of the annual cash flows using the Present Value Annuity (PVA) factor for a 9% rate of return over 4 years. The PVA factor for 9% over 4 years is approximately 3.2397. Multiplying the annual cash flow of $11,020 by the PVA factor gives us the total present value of the cash flows: $11,020 * 3.2397 = $35,698 (rounded to the nearest dollar). Subtracting the initial investment of $33,000 from this amount gives us an NPV of $2,698, which when rounded to the nearest hundred is $2,700, indicating a positive net present value. However, without the exact PVA factor provided in the question, the closest correct choice based on the provided options is a positive net present value, which is option D.

An Investment That Costs $33,000 Will Produce Annual Cash Flows