Question

What is the maximum that should be invested in a project at time zero if the inflows are estimated at $50,000 annually for 3 years, and the cost of capital is 9%?

Answer 1

the maximum amount is $126,564.73

Step-by-step explanation:

The computation of the maximum amount that should be invested at time zero is shown below:

The Present value of the annuity is

= Annuity × [1 - (1 + interest rate)^-time period] ÷ rate

= $50,000 × [1 - (1.09)^-3] ÷ 0.09

= $50,000 × 2.531294666

= $126,564.73

hence, the maximum amount is $126,564.73

We simply applied the above formula so that the correct value could come

And, the same is to be considered