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In: Accounting

Stuart Company is considering investing in two new vans that are expected to generate combined cash...

Stuart Company is considering investing in two new vans that are expected to generate combined cash inflows of $30,500 per year. The vans’ combined purchase price is $99,000. The expected life and salvage value of each are five years and $21,200, respectively. Stuart has an average cost of capital of 14 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required

  1. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.)

  2. Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted.

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Expert Solution

ekkarill92 answered 3 weeks ago
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