Julie Collins recently invested in a project that promised an internal rate of return of 15 percent.If the project has an expected annual cash inflow of $12,000 for six years,with no salvage value,how much did Julie pay for the project?
Present value tables or a financial calculator are required.

Question

Quizplus · Accepted Answer

To find the present value of the project, we need to use the formula PV = CF / (1+r)^n, where CF is the annual cash inflow, r is the internal rate of return, and n is the number of years. Substituting the given values, we get PV = 12,000 / (1+0.15)^1 + 12,000 / (1+0.15)^2 + ... + 12,000 / (1+0.15)^6 = $45,414. Therefore, Julie paid $45,414 for the project.

Julie Collins Recently Invested in a Project That Promised an Internal