Respuesta :
Answer:
Net Present Value = - $99,360
Step-by-step explanation:
As provided,
Cash outlay = $65,000 each year for 10 years
Since the first outlay will be immediately, the cumulative discounting factor for cash outlay will be @ 16% = 1 for year 0 + 4.606 for 9 years = 5.606
Therefore, cumulative present value of total cash outlay = $65,000 [tex]\times[/tex] 5.606 = $364,390
Cash inflows beginning in year 11 = $170,000 for another continuous 20 years.
these cash flow will occur in the beginning of year 11 and end of year 10
Discounting factor will be [tex]\frac{1}{(1+0.16)^1^0}[/tex] = 0.2267
For, consecutive 20 years = 1.559
Therefore, value of inflows = $170,000 [tex]\times[/tex] 1.559 = $265,030
Net Present Value = Present Value of Cash Inflows - Present Value of Cash Outflows = $265,030 - $364,390 = - $99,360
