Problem 24-1A (Part Level Submission) Depreciation is computed by the straight-l

Question

Problem 24-1A (Part Level Submission)

Depreciation is computed by the straight-line method with no salvage value. The company’s cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)

Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Problem 24-1A (Part Level Submission)

U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.
Project Bono Project Edge Project Clayton Capital investment $164,800 $180,250 $204,000 Annual net income: Year  1 14,420 18,540 27,810         2 14,420 17,510 23,690         3 14,420 16,480 21,630         4 14,420 12,360 13,390         5 14,420 9,270 12,360 Total $72,100 $74,160 $98,880

Depreciation is computed by the straight-line method with no salvage value. The company’s cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)

Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Project Bono Project Edge Project Clayton Net present value $

$

$2887 Correct

Explanation / Answer

Answer:- The net present value of Project Bono is -$5975.

The net present value of Project Edge is -$7531.

The net present value of Project Clayton is $2887.

Calculation of Net Present Value Project Bono Project Edge Project Clayton Year Discount Factor (a) Cash Inflow (b) Present value (c=a*b) Cash Inflow (d) Present value (e=a*d) Cash Inflow (f) Present value (g=a*f) $ $ $ $ $ $ 1 0.86957 47380 41200 54590 47470 68610 59661 2 0.75614 47380 35826 53560 40499 64490 48763 3 0.65752 47380 31153 52530 34540 62430 41049 4 0.57175 47380 27090 48410 27678 54190 30983 5 0.49718 47380 23556 45320 22532 53160 26430 TOTAL 158825 172719 206887 Capital Investment 164800 180250 204000 Net Present value -5975 -7531 2887

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

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