Wayne Company is considering a long-term investment project called ZIP. ZIP will
ID: 2499169 • Letter: W
Question
Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $133,512. 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 $38,900. The company’s required rate of return is 9%. 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.)
Whether this project should be accepted?
Explanation / Answer
The project should be accepted as the Net Present value is positive.
Year Cash Flows Discount @0.09 Present value of cash flows 0 -133512 1 -133512 1 41600 0.917431193 38165.14 2 41600 0.841679993 35013.89 3 41600 0.77218348 32122.83 4 41600 0.708425211 29470.49 Net Present Vlaue (NPV) 1260.347Related Questions
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