Sloan Inc.recently invested in a project with a 3-year life span.The net present value was $9,000 and annual cash inflows were $21,000 for year 1; $24,000 for year 2; and $27,000 for year 3.The initial investment for the project, assuming a 15% required rate of return, was $\begin{array}{rrr}& \text { Present Value } & \text { PV of an Annuity } \
\text { Year } & \text { of } 1 \text { at } 15 \% & \text { of } 1 \text { at } 15 \%\
\hline 1 & .870 & .870 \
2 & .756 & 1.626 \
3 & .658 & 2.283
\end{array}$
A)$45,792.
B)$45,180.
C)$29,232.
D)$38,376.

Question

Quizplus · Accepted Answer

The initial investment can be calculated by finding the present value of the cash inflows and subtracting the net present value. The present value of cash inflows is $54,180, and subtracting the NPV of $9,000 gives an initial investment of $45,180.

Sloan IncRecently Invested in a Project with a 3-Year Life Span