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A firm is considering a project with annual cash flows of $300,000. The project would have a five-year life, and the company uses a discount rate of 12%. What is the amount at which the firm would be indifferent between accepting or rejecting the investment

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Tundexi

Answer:

$1,081,434

Explanation:

At indifference point, the present value of cash outflow equals  present value of cash inflow.

Present value of cash inflow = Annual cash inflow * PV annuity factor (12%, 5 years)

Present value of cash inflow = $300,000*3.60478

Present value of cash inflow = $1,081,434

So, the amount at which the firm would be indifferent between accepting or rejecting the investment is $1,081,434.

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