I am having trouble with this problem. I have included the reference tables that

Question

I am having trouble with this problem. I have included the reference tables that we are required to use. I will also include notes from the book. There may be many ways to figure out the answers but the book requires us to use their methods. One tutor has tried to help me prior but they were unsuccessful. I am using the textbook: Kimmel, Accounting: Tools for Decision Making, 5e. This is a problem from Chapter 24 Planning Capital Investments. It is BE24-8. Please note the text in red.

Question:

Notes:

Reference Tables:

Explanation / Answer

Whether the project be accepted on not will be decided on Net Present value (NPV) basis:-

NPV = P.V. of Cash inflow - P.V. of Cash outflow

P.V. of Cash Inflow:-

Annual Net Cash inflow =( 372440 - 151750) = 220690

Total Net cash inflow for 12 Years = 220690 * 12

2648280

21352609.1184 i.e.,

$ 21352609 (Rounded off)

NPV = 21352609 - 1732532 = $ 19620077

Conclusion:- Since The NPV is positive, therefore, project should be accepted.

Annual Net Cash inflow =( 372440 - 151750) = 220690

Total Net cash inflow for 12 Years = 220690 * 12

2648280

Cumulative PV Factor @ 7% for 12 Years = 7.94269 Cumulative P.V. of Net cash inflow = 2648280 * 7.94269 21034467.0732 (a) Salvage value of facility at the end of 12th year 716520 P.V. Factor @ 7% for 12th year 0.44401 P.V. of Salvage value = 716520 * 0.44401 318142.0452 (b) P.V. of Net Cash Inflow = (a) + (b)

21352609.1184 i.e.,

$ 21352609 (Rounded off)

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.