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Park Co. is considering an investment that requires immediate payment of $27,000 and provides expected cash inflows of $9,000 annually for four years. Park Co. requires a 10% return on its investments. 1-a. What is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.)

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Answer:

Explanation:

If tables with present values factors are to be used, the solution to this question is best presented in a tabular format as shown below:

Year  Cashflow PV factor of $1 at 10%  PV (cashflow*PV Factor)

0   (27,000)              1.0000         (27,000)

1   9,000               0.9091                8,182  

2   9,000               0.8264              7,438  

3   9,000               0.7513               6,762  

4   9,000              0.6830              6,147  

     Net Present Value                 1,529  

Net present value is the sum of all presents values from t=0 to t=4

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