Hsung Company accumulates the following data concerning a proposed capital inves

Question

Hsung Company accumulates the following data concerning a proposed capital investment: cash cost $160,963, net annual cash flows $38,700, and present value factor of cash inflows for 10 years 4.49 (rounded). (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45).) Determine the net present value, and indicate whether the investment should be made. Net present value $Entry field with incorrect answer The investment Entry field with correct answer be made.

Explanation / Answer

Present value of inflows=$38700*Present value of annuity factor

=$38700*4.49

=$173,763

NPV=Present value of inflows-Present value of outflows

=$173,763-$160963

=$12800

Hence since NPV is positive;investment should be made.

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