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# Salem Co. is considering a project that yields annual net

Salem Co. is considering a project that yields annual net cash inflows of 420,000 for years 1 through 5, and a net cash inflow of 100,0000 in year 6. The project will require an initial investment of \$1,800,000. Salem's cost of capital is 10%. Present value information is presented below.

Present value of \$1 for 5 years at 10% is .62.
Present value of \$1 for 6 years at 10% is .56.
Preset value of an annuity of \$1 for 5 years at 10% is 3.79.

What was Salem's expected net present value for this project?

a) 83,000
b) (108,000)
c) (152,200)
d) (442,000)

#### Solution Summary

Salem Co. is considering a project that yields annual net cash inflows of 420,000 for years 1 through 5, and a net cash inflow of 100,0000 in year 6. The project will require an initial investment of \$1,800,000. Salem's cost of capital is 10%. Present value information is presented below.

Present value of \$1 for 5 years at 10% is .62.
Present value of \$1 for 6 years at 10% is .56.
Preset value of an annuity of \$1 for 5 years at 10% is 3.79.

What was Salem's expected net present value for this project?

a) 83,000
b) (108,000)
c) (152,200)
d) (442,000)

\$2.19