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    hwh111's Avatar
    hwh111 Posts: 1, Reputation: 1
    New Member
     
    #1

    Oct 4, 2009, 08:10 PM
    finding NPV and PI
    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's Avatar
    ArcSine Posts: 969, Reputation: 106
    Senior Member
     
    #2

    Oct 5, 2009, 03:37 AM
    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.

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