(Ignore income taxes in this problem.) The following data pertain to an investme
ID: 2530330 • Letter: #
Question
(Ignore income taxes in this problem.) The following data pertain to an investment proposal:
Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.
The net present value of the proposed investment is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
$4,806
$1,701
$3,105
$24,000
Cost of the investment $40,000 Annual cost savings $11,000 Estimated salvage value $5,000 Life of the project 5 years Discount rate 10%Explanation / Answer
Present value of inflows=$11000*Present value of annuity factor(10%,5)+$5000*Present value of discountingfactor(10%,5)
=$11000*3.791+$5000*0.621
=$44806
NPV=Present value of inflows-Present value of outflows
=$44806-$40000
=$4806(Approx).
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