Let's look at a net present value example using thepresent value of an ordinary annuity table.

The company has a project with a 5-year life that requires an initial investment of $210,000, and is expected to yield annual cash flows of $59,500. What is the net present value of the project if the required rate of return is set at 12%?

Calculation Steps

Present Value of an Annuity of $1 at Compound Interest.

Net Present Value=($59,500 x 3.605 ) -$210,000 = 4,498

Note: Round your answer to the nearest whole dollar.

What NPV does the previous calculation yield?$

Please help me understand how the 3.605 (present value factor) was found in this problem? I know I have the right answer I'm just unsure of the steps to get there.