Question 5 Wayne Company is considering a long-term investment project called ZI

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Question 5 Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $132,085. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,500, and annual cash outflows would increase by $38,500. The company’s required rate of return is 10%. Click here to view PV table. Calculate the net present value on this project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value Whether this project should be accepted? The project should be .

Explanation / Answer

CASHOUTFLOW 132085 YEAR INCREASED REVENUE INCREASED COST INCREASED CASH FLOW PRESENT VALUE@10% PRESENT VALUE OF CASH FLOW 1 80500 38500 42000 0.909090909 38181.818 2 80500 38500 42000 0.826446281 34710.744 3 80500 38500 42000 0.751314801 31555.222 4 80500 38500 42000 0.683013455 28686.565 SUM OF PRESENT VALUE OF CASH INFLOWS 133134.35 CASH OUTFLOWS 132085 NPV 1049.3487

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