Problem:
A $550,000 capital investment proposal has an estimated life of four years and no residual value. The estimated net cash flows are as follows:
|
Year
|
Net Cash Flow
|
|
1
|
$300,000
|
|
2
|
280,000
|
|
3
|
208,000
|
|
4
|
180,000
|
The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712, and .636, respectively.
Required:
Question: Determine the net present value.
Note: Please show how to work it out.