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Problem:

A proposed project requires an investment of $1000 which is obtained as a loan at the end of year 0. The project last 5 years and the loan is paid off as a fixed annual annuity over this period.

1. Determine the annuity for a compound interest rate of 5%.

2. The project cost $200 per year to run and earns a profit of $800 per year, both for years 1 through 5. Draw the cash flow diagram for the project. Remember to include the annuity payments.

3. Given a time value of money of 10%, calculate the present value of the project. Is it a worth while investment?

Note: Please show guided help with steps and answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91168654

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