4 076 points Qs 24-12 Net present value, with salvage value LO P3 Following is i

Question

4 076 points Qs 24-12 Net present value, with salvage value LO P3 Following is information on an investment considered by Hudson Co. Assume the investment has a salvage value of $24,000. The company requires a 3% return from its investments Investment A1 $400,000) Initial investment Expected net cash flows in year (excluding salvage value) 150,000 142,000 s net present value. (EV of $1 PV of s1 FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places. Round Present Value of Net Cash Flows to the nearest whole dollar.) Net Cash Present Value Present Value of Net Flows Of 1 at 390 Year 1 Year 2 Year 3 Net present value

Explanation / Answer

Calculate net present value :

Net cash flow Present value of 1 at 3% Present value of net cash flows Year 1 150000 0.9709 145635 Year 2 142000 0.9426 133849 Year 3 127000 0.9151 116218 Totals 419000 395702 Amount invested -400000 Net present value -4298

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