Question
In: Accounting
Net Present Value A project has estimated annual net cash flows of $6,250 for seven years...
Net Present Value
A project has estimated annual net cash flows of $6,250 for seven years and is estimated to cost $45,000. Assume a minimum acceptable rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below.
| Present Value of an Annuity of $1 at Compound Interest | |||||
| Year | 6% | 10% | 12% | 15% | 20% |
| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
| 2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
| 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
| 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
| 5 | 4.212 | 3.791 | 3.605 | 3.353 | 2.991 |
| 6 | 4.917 | 4.355 | 4.111 | 3.785 | 3.326 |
| 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
| 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
| 9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
| 10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value.
| Net present value of the project (round to the nearest dollar) | $ |
| Present value index (rounded to two decimal places) |
Solutions
Expert Solution
| (a) | Net Present Value | $ -14,575 | ||||||||||
| Working: | ||||||||||||
| Present value of cash inflows | = | Annual Cash inflows | x | Present value of annuity of 1 @ 10% for 7 years | = | $ 6,250 | x | 4.868 | = | $ 30,425 | ||
| Less Cost | $ 45,000 | |||||||||||
| Net Present Value | $ -14,575 | |||||||||||
| (b) | Present value index | 0.68 | ||||||||||
| Working: | ||||||||||||
| Present value index | = | Present value of cash inflows | / | Cost | ||||||||
| = | $ 30,425 | / | $ 45,000 | |||||||||
| = | 0.68 | |||||||||||
ekkarill92 answered 7 months agoRelated Solutions
22. Net Present Value A project has estimated annual net cash flows of $12,500 for one...
22. Net Present Value
A project has estimated annual net cash flows of $12,500 for one
years and is estimated to cost $42,500. Assume a minimum acceptable
rate of return of 10%. Use the Present Value of an Annuity
of $1 at Compound Interest table below.
Present Value of an Annuity of $1 at
Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
2.283
2.106...
Citrus Company is considering a project that has estimated annual net cash flows of $21,300 for...
Citrus Company is considering a project that has estimated
annual net cash flows of $21,300 for six years and is estimated to
cost $100,000. Citrus’s cost of capital is 8 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...
Citrus Company is considering a project that has estimated annual net cash flows of $21,300 for...
Citrus Company is considering a project that has estimated
annual net cash flows of $21,300 for six years and is estimated to
cost $100,000. Citrus’s cost of capital is 8 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...
Citrus Company is considering a project that has estimated annual net cash flows of $41,535 for...
Citrus Company is considering a project that has estimated
annual net cash flows of $41,535 for seven years and is estimated
to cost $195,000. Citrus’s cost of capital is 12 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...
Question #1) Cash Payback Period A project has estimated annual net cash flows of $28,000. It...
Question #1)
Cash Payback Period
A project has estimated annual net cash flows of $28,000. It is
estimated to cost $165,200.
Determine the cash payback period. Round your answer to
one decimal place.
years
Question #2)
Average Rate of Return
Determine the average rate of return for a project that is
estimated to yield total income of $773,760 over six years, has a
cost of $748,800, and has a $83,200 residual value. Round to the
nearest whole number.
%
A project is estimated to cost $463,565 and provide annual net cash flows of $115,000 for...
A project is estimated to cost $463,565 and provide annual net
cash flows of $115,000 for nine years.
Present Value of an Annuity of $1 at
Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589
5
4.212
3.791
3.605
3.353
2.991
6
4.917
4.355
4.111
3.785
3.326
7
5.582
4.868
4.564
4.160
3.605
8
6.210
5.335
4.968...
Project cost $100 000 Estimated life 5 years Estimated residual value $20 000 Annual Net Cash...
Project cost
$100 000
Estimated life
5 years
Estimated residual value
$20 000
Annual Net Cash flow
$30 000
Required rate of return
10%
Given the data above, calculate the internal rate of return
(IRR). (not using excel)
what is the net present value of a project with the following after tax cash flows...
what is the net present value of a project with the following after
tax cash flows using a discount rate of 10% year 0 45,000 year 1
14,000 year 2 14,000 year 3 10,000 year 4 10,000 year 5 8,000
would you accept the project? ehat is payback period? what is the
profitbility index?
Net present value. Quark Industries has a project with the following projected cash flows: Initial cost:...
Net present value. Quark Industries has a project with the
following projected cash flows: Initial cost: $210,000 Cash flow
year one: $25,000 Cash flow year two: $72,000 Cash flow year
three: $146,000 Cash flow year four: $146,000 a. Using a
discount rate of 11% for this project and the NPV model,
determine whether the company should accept or reject this project.
b. Should the company accept or reject it using a discount rate of
13%? c. Should the company accept...
Net present value. Quark Industries has a project with the following projected cash flows: Initial cost:...
Net present value. Quark Industries has a
project with the following projected cash flows:
Initial cost: $270,000
Cash flow year one: $24,000
Cash flow year two: $79,000
Cash flow year three: $155,000
Cash flow year four: $155,000
a. Using a discount rate of 10% for this
project and the NPV model, determine whether the company should
accept or reject this project.
b. Should the company accept or reject it using
a discount rate of 13%?
c. Should the company accept...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 1. Consider the following nuclides: &
- In general, teams can be described three ways. Name and define each.
- JAVASCRIPT: Please create an array of student names and another array of student grades. - Create...
- Topic - Construction: Structural, loads, tension 1.) Explain why pure tension members are the most efficient...
- Procter and Gamble (PG) paid an annual dividend of $ 1.62$1.62 in 2009. You expect PG...
- locate a recent case of online child pornography. Write a summary of the incident and describe...
- #Python 5. Write function called evaluate() that evaluates the following Python expressions or assignments as specified:...
ADVERTISEMENT