An investment that costs $40,000 will produce annual cash flows of $12,000 for a period of 4 years.Given a desired rate of return of 10%,what will the investment generate? (Do not round your intermediate calculations.Round your answer to nearest whole dollar. )

Question

Quizplus · Accepted Answer

Net present value = (Expected annual cash flows x PV factor)- Cost of investment
Net present value = ($12,000 x 3.169865)- $40,000 = $(1,962)(rounded)
PV factor from Appendix Table 2 (n =4,i = 10)

An Investment That Costs $40,000 Will Produce Annual Cash Flows