Exercise 24-2 Net present value LO P3 Beyer Company is considering the purchase

Question

Exercise 24-2 Net present value LO P3

Beyer Company is considering the purchase of an asset for $205,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 9% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

a. Compute the net present value of this investment. (Round your answers to the nearest whole dollar.)

Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 62,000 $ 49,000 $ 98,000 $ 166,000 $ 39,000 $ 414,000

Explanation / Answer

a. Compute the net present value of this investment. (Round your answers to the nearest whole dollar.)

Year Net Cash Flows Present Value of 1 at 9% Present Value of Net Cash Flows 1 62000 0.917 56881 2 49000 0.842 41242 3 98000 0.772 75674 4 166000 0.708 117599 5 39000 0.65 25347 Totals 414000 316743 Amount invested -205000 Net present value 111743

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