Investment A requires a net investment of $1,400,000.The required rate of return is 10% for the five-year annuity.What are the annual cash inflows if the net present value equals 0? (rounded)
A) $378,966
B) $369,296
C) $345,696
D) $251,466

Question

Quizplus · Accepted Answer

The net present value (NPV) is zero when the present value of cash inflows equals the initial investment. Using the annuity formula for NPV = 0, we calculate the annual cash inflow using the present value annuity factor for 5 years at 10%, which gives approximately $369,296.

Investment a Requires a Net Investment of $1,400,000