M11-5 Calculating Net Present Value [LO 11-3] Citrus Company is considering a pr
ID: 2601035 • Letter: M
Question
M11-5 Calculating Net Present Value [LO 11-3] Citrus Company is considering a project that has estimated annual net cash flows of $40,470 for six years and is estimated to cost $190,000. Citrus's cost of capital is 11 percent. Determine the net present value of the project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round your final answer to 2 decimal places.) Present Value Based on NPV, determine whether project is acceptable to Citrus. OAcceptableExplanation / Answer
M11-5 Citrus Company
Net present value = -$190,000 + [$40,470 x PVA (i = 11%, n = 6 years)] = -$190,000 + [$40,470 x 4.23054] = -$190,000 + $171,209.95 = -$18,790.05
Unacceptable.
The project is unacceptable since it has a negative net present value.
Note: A five decimal place factor has been used. Please use appropriately as per the tables provided since the same have not been posted with the question.
M11-7 Vaughn Company
Net present value = -$520000 + [$83,000 x PVA (i=9%, n = 10 years)] = -$520000 + [$83,000 x 6.41766] = -$520000 + $532,665.78 = $12,665.78
Note: A five decimal place factor has been used. Please use appropriately as per the tables provided since the same have not been posted with the question.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.