Net Present Value

A project has estimated annual net cash flows of $11,250 for ten years and is estimated to cost $50,000. Assume a minimum acceptable rate of return of 20%. Use thePresent Value of an Annuityof $1 at Compound Interesttable below.

Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.52832.6732.4872.4022.2832.10643.4653.1703.0372.8552.58954.2123.7913.6053.3532.99164.9174.3554.1113.7853.32675.5824.8684.5644.1603.60586.2105.3354.9684.4873.83796.8025.7595.3284.7724.031107.3606.1455.6505.0194.192

Determine (a) the net present value of the project and (b) thepresent value index. If required, use the minus sign to indicate a negative net present value.

Net present value of the project (round to the nearest dollar)Present value index (rounded to two decimal places)