A project has estimated annual net cash flows of $22,000 for four years and is estimated to cost $70,000. Assume a minimum acceptable rate of return of 12%.
Partial Present Value of an Annuity Table
|
Present Value of an Annuity of $1 at Compound Interest |
|||||
|
Year |
6% |
10% |
12% |
15% |
20% |
|
1 |
0.943 |
0.909 |
0.893 |
0.870 |
0.833 |
|
2 |
1.833 |
1.736 |
1.690 |
1.626 |
1.528 |
|
3 |
2.673 |
2.487 |
2.402 |
2.283 |
2.106 |
|
4 |
3.465 |
3.170 |
3.037 |
2.855 |
2.589 |
|
5 |
4.212 |
3.791 |
3.605 |
3.353 |
2.991 |
|
6 |
4.917 |
4.355 |
4.111 |
3.785 |
3.326 |
|
7 |
5.582 |
4.868 |
4.564 |
4.160 |
3.605 |
|
8 |
6.210 |
5.335 |
4.968 |
4.487 |
3.837 |
|
9 |
6.802 |
5.759 |
5.328 |
4.772 |
4.031 |
|
10 |
7.360 |
6.145 |
5.650 |
5.019 |
4.192 |
Determine (1) the net present value of the project and (2) the present value index, rounded to two decimal places.