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A project that will last for 9 years is expected to have equal annual cash flows...

A project that will last for 9 years is expected to have equal annual cash flows of $100,000. If the required return is 8.3 percent, what maximum initial investment would make the project acceptable?

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Expert Solution

Maximum initial investment P×[1-(1÷(1+r)^n)]÷r
Here,
A Interest rate per annum 8.30%
B Number of years                                                               9
C Number of compoundings per per annum                                                               1
A÷C Interest rate per period ( r) 8.30%
B×C Number of periods (n) 9
Payment per period (P) $                                               100,000
Maximum initial investment $                                         616,970.26
100000×(1-(1÷(1+8.3%)^9))÷8.3%

jeff jeffy answered 2 years ago
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