Caldwell Corporation is considering an investment proposal t

Caldwell Corporation is considering an investment proposal that will require an initial outlay of $810,000 and would yield yearly cash inflows of $208,000 for nine years. The company uses a discount rate of 10%. What is the NPV of the investment? Present value of an ordinary annuity of $1 5% 9% 10% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 0.917 1.759 2.531 3.24 3.89 4.486 5.033 0.909 1.736 2.487 3.17 3.791 4.355 4.868 4 O A. $250,833 O B. $405,000 O C. $364,000 O D. $387,872

Solution

Time Factor (10%) Present Value Initial cost of project ($810,000) Now 1     (810,000.00) Annual inflows          208,000 1-9               5.759    1,197,872.00 NPV        387,872.00 Ans D