Question: Question Content Area Below is a table for the present value of $1 at Compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2

Question Content Area

Below is a table for the present value of $1 at Compound interest.

Year 6% 10% 12%
1 0.943 0.909 0.893
2 0.890 0.826 0.797
3 0.840 0.751 0.712
4 0.792 0.683 0.636
5 0.747 0.621 0.567

Below is a table for the present value of an annuity of $1 at compound interest.

Year 6% 10% 12%
1 0.943 0.909 0.893
2 1.833 1.736 1.690
3 2.673 2.487 2.402
4 3.465 3.170 3.037
5 4.212 3.791 3.605

Using the tables above, if an investment is made now for $21,450 that will generate a cash inflow of $7,150 a year for the next 4 years, what would be the net present value (rounded to the nearest dollar) of the investment, assuming an earnings rate of 10%?

a. $1,216

b. $7,150

c. $21,450

d. $22,666

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