Question

An orcharder spends $110,000 to plant pomegranate bushes. It will take four years for the bushes to provide a usable crop. He estimates that every year for 20 years after that he will receive a crop worth $10,500 per year. If the discount rate is 9%, what is the net present value (NPV) of this investment?

Is there a way to solve this using a graphing calculator, ie casio fx-9750 gii

Answer 1

Annual cash inflows will start 4 years from now after investment.It means total life of investment is 24 years.
Present value of cash inflows			$     67,902.36
Less Investment			$ 1,10,000.00
Net Present value			$   -42,097.64
Working:
# 1	Present value of annuity of 1 for 20 years	=	(1-(1+i)^-n)/i		Where,
		=	(1-(1+0.09)^-20)/0.09		i	9%
		=	9.128545669		n	20
# 2	Present value of 1 received at the end of year 4	=	(1+i)^-n		Where,
		=	(1+0.09)^-4		i	9%
		=	0.708425211		n	4
# 3	Present value of cash inflows	=	Annual Cash inflows for 20 years	*	Present value of annuity of 1 for 20 years	*	Present value of 1 received at the end of year 4
		=	$     10,500.00	*	9.128546	*	0.708425
		=	$     67,902.36