A project has estimated annual net cash flows of $96,200 for four years and is estimated to cost $315,500.

A project has estimated annual net cash flows of $96,200 for four years and is estimated to cost $315,500. Assume a minimum acceptable rate of return of 10%. Using Exhibit 2, determine (1) the net present value of the project and (2) the present value index, rounded to two decimal places.

Answer:
a. ($10,546) [($96,200 × 3.170) – $315,500]
b. 0.97 ($304,954 ÷ $315,500)