[hwh111]

3) Find the NPV and PI of annuity that pays $500 per year for 8 years and costs $2,500. Assume a discount rate of 6%.

Year Cash Flow 6% PVIF Present Value
z -$2,500 1.0 $2,500
1 $500 0.943 $471.5
2 $500 0.890 $445
3 $500 0.840 $420
4 $500 0.792 $396
5 $500 0.747 $373.50
6 $500 0.705 $352.5
7 $500 0.665 $332.5
8 $500 0.627 $313.5

is this correct?

[ArcSine]

You will have the correct answer for NPV when you (1) remember that the initial cash flow has a PV of negative 2,500; and then (2) add up that last column.