Tangerine Inc. is evaluating a capital project for investment. The initial cash outflow in Year 0 is $1,500 followed by cash inflow of $500 each year for four years. Which of the following is the terminal value of the project? Assume the required rate of return is 12 percent.

Question

Quizplus · Accepted Answer

The terminal value is calculated by finding the future value of the cash inflows at the end of the project. Using the formula for future value of an annuity: FV = C * [(1 + r)^n - 1] / r, where C = $500, r = 0.12, and n = 4, the terminal value is approximately $2,389.66.