Do It Review 12-2 Wayne Company is considering a long-term investment project ca

Question

Do It Review 12-2 Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $125,011. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,400, and annual cash outflows would increase by $40,600. 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 O 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 LINK TO TEXT

Explanation / Answer

Yes, the project should be accepted as the NPV is positive.

Initial investment $1,25,011 Incremental cash inflows $80,400 Incremental cash outflows $40,600 Net annual cash flow $39,800 PV factor (10%, 4) $3.1699 PV of cash inflows $1,26,162 NPV $1,151

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