om/flow/co 24 HW Check 2 Required information The following information applies
ID: 2393126 • Letter: O
Question
om/flow/co 24 HW Check 2 Required information The following information applies to the questions displayed below,J Peng Company is considering an investment expected to generate an average net income after taxes of $3,200 for three .66 years. The investment costs $57,300 and has an estimated $7,500 salvage value Assume Peng requires a 15% return on its investments. Compute the net present value of this investment Assume the company uses straight-ine depreciation. (PV of $1, FV of $1. PVA of $1, amounts should be indicated by a minus sign.) and FVA of $1) (Use oppropriate factorts) from the tables provided. NegativeExplanation / Answer
CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD Purchase Cost of Machine $ 57,300 Less: Salvage Value $ 7,500 Net Value for Depreciation $ 49,800 Usefule life of the Assets 3 years Depreciation per year = Value for Depreciation / 3 years = $ 16,600 Depreaiction for the Year 1 = $ 16,600 Depreaiction for the Year 2 = $ 16,600 Depreaiction for the Year 3 = $ 16,600 CALCULATION OF THE NET CASH FLOW PER YEAR Net Profit After Tax = $ 3,200 Add: Depreciation per year $ 16,600 Net Cash inflow per year = $ 19,800 CALCULATION OF THE PRESENT VALUE : CASH FLOW Amount "X " PV Factor Present Value Annual Cash Flow Year 1 to Year 3 $ 19,800 "X " 2.283 $ 45,207.86 Residual Value Year 3 $ 7,500 "X " 0.658 $ 4,931.37 Initial Investment Year 01 $ -57,300 "X " 1.000 -57,300.0 Net Present Value $ -7,160.77 Answer = Net present Value = -7,160.77 Answer = Net present Value (Round off Nearest $ ) = $ -7,161 Present Value Factor @ 15% Year 1 0.870 Year 2 0.756 Year 3 0.658 Total 2.283
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