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A project with an initial investment of $461,300 will generate equal annual cash flows over its 10-year life. The project has a required return of 8.1 percent. What is the minimum annual cash flow required to accept the project

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anthougo

Answer:

The minimum annual cash flow required to accept the project is:

= $63,883.17

Explanation:

a) Data and Calculations:

Initial investment cost of the project = $461,300

Project's estimated life = 10 years

Project's required return rate = 8.1%

The minimum annual cash flow required to accept the project is derived from an online financial calculator as follows:

N (# of periods)  10

I/Y (Interest per year)  8.1

PV (Present Value)  461300

FV (Future Value)  0

Results:

PMT = $63,883.17

Sum of all periodic payments = $638,831.69

Total Interest = $177,531.69

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