What is the maximum that should be invested in a project at time zero if the inflows are estimated at $40,000 annually for three years, and the cost of capital is 9 percent?
A)$101,251.79
B)$109,200.00
C)$117,871.97
D)$130,800.00 0 = $40,000

Question

Quizplus · Accepted Answer

The maximum investment is the present value of the inflows, calculated using the formula for the present value of an annuity. The present value of $40,000 annually for three years at a 9% discount rate is approximately $101,251.79.

What Is the Maximum That Should Be Invested in a Project