An asset is purchased for 240 000 It is expected to provide an additional 56 000 of annual net cash inflows The asset has a 10 year life and an expected salvage value of 24 000 The hurdle rate is 10 The present value of an annuity factor of 10 for 10 years is 6 1446 and the present value of 1 discounted for 10 years of 10 is 0 3855 Given the data provided the net present value of the investment is approximately

An asset is purchased for 240 000 It is expected to provide an additional 56 000 of annual net cash inflows The asset has a 10 year life and an expected salvage value of 24 000 The hurdle rate is 10 The present value of an annuity factor of 10 for 10 years is 6 1446 and the present value of 1 discounted for 10 years of 10 is 0 3855 Given the data provided the net present value of the investment is approximately

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3BE

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An investment of 1,000 produces a net cash inflow of 500 in the first year and 750 in the second year. What is the payback period? a. 1.67 years b. 0.50 year c. 2.00 years d. 1.20 years e. Cannot be determined
Project 1 requires an original investment of $96,300. The project will yield cash flows of $16,000 per year for 6 years. Project 2 has a computed net present value of $26,300 over a 4-year life. Project 1 could be sold at the end of 4 years for a price of $82,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 10.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.43 20.335 7 0.665 0.513 0.452 0.376 0.279 8 0 627 0.467 0.404 0.327 0.233.9 0.592 0.424 0:361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 10.943 0.909 0.893 0.870 0.833 2 1833 1736 1.690 1626 1.528 3 2,673 2.487 2.402 2 283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791…
Project 1 requires an original investment of $67,400. The project will yield cash flows of $13,000 per year for 10 years. Project 2 has a computed net present value of $17,700 over a 8-year life. Project 1 could be sold at the end of 8 years for a price of $54,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4…
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A project has estimated annual net cash flows of $147,000 for 4 years and is estimated to cost $475,500. Assume a minimum acceptable rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine (1) the net present value of the project and (2) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) $ Present value index (rounded to two decimal places)
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