1. Hsung Company accumulates the following data concerning a proposed capital in
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Question
1. Hsung Company accumulates the following data concerning a proposed capital investment: cash cost $203,200, net annual cash flows $35,000, and present value factor of cash inflows for 10 years 6.14 (rounded). (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
Determine the net present value, and indicate whether the investment should be made.
2. Kanye Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $175,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash flows by $34,771. Click here to view PV table.
What is its approximate internal rate of return? (Round answer to 0 decimal place, e.g. 125.)
Explanation / Answer
Solution:
Initial Investment -203,200 Net annual cash flows 35,000 Present value factor - given 6.14 Present value of cash flows 214,900 NPV = Present value of cashflows - initial investment 11,700 NPV = 11,700 Since, NPV is positive, the investment should be madeRelated Questions
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