Problem:
A proposed project requires an investment of $1000 which is obtained as a loan at the end of year 0. The project last 5 years and the loan is paid off as a fi xed annual annuity over this period.
1. Determine the annuity for a compound interest rate of 5%.
2. The project cost $200 per year to run and earns a profit of $800 per year, both for years 1 through 5. Draw the cash flow diagram for the project. Remember to include the annuity payments.
3. Given a time value of money of 10%, calculate the present value of the project. Is it a worth while investment?
Note: Please show guided help with steps and answer.