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? Use Appendix Table 2. (Do not round your intermediate calculations. Round your answer to the nearest whole dollar.)

Question

Quizplus · Accepted Answer

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

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