# A project has estimated annual net cash flows of \$6,250 for nine years and is estimated to cost \$40,000. Assume a minimum acceptablerate of return of 12%. Use the Present Value of an Annuity of \$1 at Compound Interest table below.Present Value of an Annuity of \$1 at Compound InterestYear10%12%15%0.9430.9090.8930.8700.8331.8331.7361.6901.6261.5282.10632.6732.4872.4022.28343.4653.1703.0372.8552.5893.3534.2123.7913.6052.9913.3266.4.9174.3554.1113.7853.6055.5824.8684.5644.1606.2105.3354.9684.4873.8376.8025.7595.3284.7724.0315.650107.3606.1455.0194.192Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative netpresent value.Net present value of the project (round to the nearest dollar)Present value index (rounded to two decimal places)

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Step 1

Net present value of a project is calculated by deducting the cost of project from the present value of cash inflows. A project is selected if it has positive net present value and vice-a-versa.

Step 2

Cost of project: \$40,000

Annual cash flow: \$6,250

Time: 9 years

Interest rate: 12%

a)

Present value of cash inflow is calculated as follows:

Step 3

Net present value of the project ...

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