RACK Brief Exercise 24-6 Quillen Company is performing a post-audit of a project
ID: 2432606 • Letter: R
Question
RACK Brief Exercise 24-6 Quillen Company is performing a post-audit of a project completed one result in net annusl cash flows of $46,300 per year Now that the investment has been i year ago. The initial estimates were that the project would cost $241,565, would have a useful life of 9 years, nero salvage value, and would n operation for 1 year, revised figures indicate that it actually cost $250,859, ill have a total usetul Iife of 11 years, either a negative sign preceding the number eg 45 or Evaluate the success of the project. Assume a discount rate of 11% (" the net present value s negatives use present value answers to o decimal places, e.g. 125. For cakculation parentheses eg (45). Rownd purposes, use S decinmal places as displayed in the factor table provided.) Oniginal estimate net present value The project by accessing this Question Assistance, you will learn while you eam points based on the Point Potential Policy set by your instructor Question Attemptse Unlimited SAVE FOR LAnsExplanation / Answer
Calculating Net Present Value as per Original Plan
Project Cost = $241,565
Net annual cash flow per year = $46,300
Useful Life = 9 years
Discount Rate = 11%
Present Value Annuity Factor (9 years) = 5.5370
Present Value of cash flows for 9 years = $46,300 X 5.5370
= $256,363
Net Present Value = Total Cash Inflows - Cash Outflow
= $256,363 - $241,565
= $14,798
Calculating Net Present Value as per Revised Plan
Project Cost = $250,859
Net annual cash flow per year = $39,700
Useful Life = 11 years
Discount Rate = 11%
Present Value Annuity Factor (11 years) = 6.2065
Present Value of cash flows for 11 years = $39,700 X 6.2065
= $246,398
Net Present Value = Total Cash Inflows - Cash Outflow
= $246,398 - $250,859
= ($4,461)
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