Present value of $1

Periods 4% 6% 8% 10% 12% 14%

1 0.962 0.943 0.926 0.909 0.893 0.877

2 0.925 0.890 0.857 0.826 0.797 0.769

3 0.889 0.840 0.794 0.751 0.712 0.675

4 0.855 0.792 0.735 0.683 0.636 0.592

5 0.822 0.747 0.681 0.621 0.567 0.519

6 0.790 0.705 0.630 0.564 0.507 0.456

7 0.760 0.665 0.583 0.513 0.452 0.400

8 0.731 0.627 0.540 0.467 0.404 0.351

9 0.703 0.592 0.500 0.424 0.361 0.308

10 0.676 0.558 0.463 0.386 0.322 0.270

Present value of an Annuity of $1

Periods 4% 6% 8% 10% 12% 14%

1 0.962 0.943 0.926 0.909 0.893 0.877

2 1.886 1.833 1.783 1.736 1.690 1.647

3 2.775 2.673 2.577 2.487 2.402 2.322

4 3.630 3.465 3.312 3.170 3.037 2.914

5 4.452 4.212 3.993 3.791 3.605 3.433

6 5.242 4.917 4.623 4.355 4.111 3.889

7 6.002 5.582 5.206 4.868 4.564 4.288

8 6.733 6.210 5.747 5.335 4.968 4.639

9 7.435 6.802 6.247 5.759 5.328 4.946

10 8.111 7.360 6.710 6.145 5.650 5.216

Roman Knoze is considering two investments. Each will cost $20,000 initially. Project 1 will return annual cash flows of $10,000 in each of three years. Project 2 will return $5,000 in year 1, $10,000 in year 2, and $15,000 in year 3. Roman requires a minimum rate of return of 10%.

What is the net present value of Project 2?

You can use the tables above or the EXCEL formulas.

a. $5,670

b. $20,000

c. $2,530

d. $24,070

e. $4,070