Question

Park Co. is considering an investment that requires immediate payment of $27,000 and provides expected cash inflows of $9,000 annually for four years. Park Co. requires a 10% return on its investments. 1-a. What is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)

Answer 1

Step-by-step explanation:

If tables with present values factors are to be used, the solution to this question is best presented in a tabular format as shown below:

Year Cashflow PV factor of $1 at 10% PV (cashflow*PV Factor)

0 (27,000) 1.0000 (27,000)

1 9,000 0.9091 8,182

2 9,000 0.8264 7,438

3 9,000 0.7513 6,762

4 9,000 0.6830 6,147

Net Present Value 1,529

Net present value is the sum of all presents values from t=0 to t=4