Homework Chapter 10 Homework P105 similar to Type here to s

Homework: Chapter 10 - Homework P10-5 (similar to) Type here to search

Solution

Present Value of annuity of 1 = (1-(1+i)^-n)/i Where, = (1-(1+0.16)^-25)/0.16 i 16% = 6.097092 n 25 Present Value of annual cash flows = Annual Cash flows x Present Value of annuity of 1 = $   8,000.00 x 6.097092 = $ 48,776.74 Present Value of annual cash flows $ 48,776.74 Less: Initial Cost $ 40,000.00 Net Present Value $   8,776.74 Since, It has Positive Net Present Value, project is acceptable.